Top Trading Strategies That Work – Introduction
The success of any trader depends on the strategies that they use. Fortunately, there are hundreds of strategies that one can use to trade. There are those strategies that involve buying and holding ‘assets’ for a long period before exiting. There are others where traders buy and exit within a few minutes. In this article, I will highlight a few trading strategies that traders use.
- Social Trading
This is a trading strategy specially for beginners or people who don’t want to do the hard work. In social trading, traders follow successful traders. Several brokers offer this as a service. The idea is to follow a trader who is successful and then copy trades from them. If a trade goes well, the trader pays a slight commission to the trader they are copying from. If you are a beginner who does not want to take the long route to success, this can be an ideal strategy for you. However, I recommend that you first take time to understand the basic concepts of trading. Also, you should understand that though the track record of the trader you are copying from is important, it is not an indication of how successful you will be.
This is a strategy that many day traders are involved in. In scalping, a trader opens a trade and then exits within minutes or seconds after making a small profit. Here, you are not interested in the underlying fundamentals of a currency pair or a company. You are instead interested in making a short-term profit. The success of this strategy depends on several things. First, you need to first understand the factors that move the market. Second, you need to understand how to spot trading opportunities fast enough. Third, you need to understand how to set up the stop loss and the take profit.
- Swing Trading
This is a strategy very different from scalping. As a swing trader, your strategy is to identify a trend and then follow it within a few days. Ideally, even in a long-term uptrend, the market will often experience some pullbacks. As a trader, you want to spot opportunities when a trend is about to form, open a trade, and set up the stop-loss and take-profit. Setting the two will help protect your trade from any downside. One way of spotting these opportunities is to use a few technical indicators which show when a trend is forming. Another way is to use the news. Many times, when there is a market-moving news, certain ‘assets’ will move in a certain trend. As a swing trader, you want to take advantage of these swings.
- Positional Trading
This is primarily a long-term trading strategy where a trader buys or sells ‘assets’ for the long-term. In this strategy, a trader does research about an asset and then buys and holds it with the long-term in mind. Your goal here is not to buy and exit within minutes like scalpers do. To succeed in this strategy, you need to do a few things. First, you need to focus on long-term charts. Most positional traders use daily charts. Second, you need to use tiny lots. Tiny lots will help protect your account in periods of high volatility. Third, you want to place your stop loss and take profits in strategic locations. This will also help you protect your account in periods of high volatility. Finally, you want to monitor the news so that you can close the trade when things don’t go right.