The power of the internet has made the popularity of trading skyrocket. Nowadays, as long as you’re connected to the web, you can trade in financial markets as much as you want. However, just because trading has been made easier, it doesn’t mean anyone can succeed as a financial trader. In fact, if you dive into it without doing enough research, you might lose money. One of the key things to learn before you start trading is what trading strategies and exist and which of them match your trading personality the best. With that said, let’s take a better look at five profitable trading strategies that are ideal for new traders.
News trading strategy
A news trading strategy is relatively straightforward. You, the trader, base your moves on the news and market expectations. Due to the rise of technology, the news now travels very quickly, and making moves in a timely fashion is a must if you want to use this strategy. Also, it takes an understanding of how the market works to be able to rely on this strategy. Just think about it, if you’re not familiar with the ways the market moves, how can you predict the impact a piece of information will have on the market? This is why it’s a good idea to trade using simulators before you start employing the news trading strategy. The reason why the news trading strategy is effective is good for beginners is that it has a defined entry and exit strategy. This makes decision-making easier for rookie traders. Plus, the amount of information available on digital media, it opens up many trade opportunities every day.
As the name suggests, this trading strategy is all about trading before the market closes. What’s great about this strategy is that encourages you to make moves once prices start settling and you can make your moves safely. In order for this strategy to work, it’s important to analyze price action in comparison to the movements that took place the day before. That way, you get the idea of the way prices to move and identify indicators you can use in your system. While this strategy can turn out to work well, it also requires the trader to come up with a risk management strategy. It’s a good idea to create a stop-loss order and a limit order to protect yourself from overnight risk. Another good thing about this strategy is that it requires less preparation than some other strategies on this list. You can come up with a schedule that works for you and only place market orders in the morning or at night.
Day trading strategy
Day trading is a strategy that is completely opposite from the strategy we discussed in the section above. When employing the day trading strategy, you make trades in the daytime and rely on fluctuations while the market is open. Individuals who employ this strategy usually want to make trading their full-time profession. This is because this strategy includes having multiple positions open during the day and closing them before in the evening. In order for this strategy to work, the trader needs a well-designed schedule they can stick to as the time frame they operate in is relatively short. For example, just before the trade market opens, you should predict the reactions to the moves that took place overnight. Most traders you make when employing this strategy last no longer than four hours, meaning that there’s less way less risk than there is in long-term trading. The only problem is that some positions stay the same during the day, often resulting in flat trades.
The scalping strategy is exactly what it sounds like. It involves placing short-term trades “scalping” a small profit from every move you make. Beginner traders usually prefer working with smaller amounts of money which are why relying on the scalping strategy makes a lot of sense. However, it’s important to mention that using this strategy requires a lot of discipline, especially when it comes to your existing strategy. Sometimes, if you don’t exit on time, a large loss may occur, eliminating many of your other moves that have resulted in small amounts of profit. To put it simply, this strategy is all about acting before the market even has a chance to move. As a scalper, you don’t hold any of your positions overnight, meaning that there’s no overnight risk. In fact, most of your moves should last no longer than just a few minutes. This is why scalping is seen as an ideal hobby.
If you did some research on trading before reading this post, chances are you’ve come across the saying “The trend is your friend.” This is exactly what many traders rely on when making important trading decisions. This strategy is called the “Trend” strategy and it includes relying solely on technical analysis. Basically, what you do is follow trends you defined by performing technical analysis. Trend traders usually don’t have a fixed view of where the market is going and they only rely on current trends when making trading decisions. Succeeding using this strategy requires you to first come up with accurate systems to use and then making the right moves based on those systems. This is a popular strategy among individuals who like to exercise their patience and follow their own rules as strictly as possible. Once you create a trend identification system, making your future moves is relatively straightforward. This means you can pull it off even when having a limited amount of time to dedicate to trading.
Over to you
It’s important to remember that there are no right or wrong trading strategies in the financial market. Each of these strategies come with their pros and cons and it’s all about identifying the ones you feel comfortable about. Before you do that, you have to think about when you want to trade, how much risk you’re fine with, and whether you see trading as a hobby or as a profession. Identify the strategy that matches your situation and you’ll enjoy every second of it.
Jessie Connor is a passionate writer and researcher from Brisbane, contributor at several business and lifestyle blogs, hooked on yoga and healthy living. She loves to spend her free time travelling, reading and of course – shopping!