The financial markets offer trading opportunities for traders of all levels. Investors try and speculate the price action and the future of instruments based on their game plan. They try and formulate the best strategy to beat the markets. This requires a lot of effort from a trader’s end, and it takes much time before an investor can get used to a good strategy. Even with the best map in hand, it is possible to lose. Our article will present the best trading strategies and discuss how you can use them effectively as a market participant.
Traders can trade CFDs online with Xtrade and employ their trading strategies with the ability to speculate the market on both long and short sides. Xtrade WebTrader can help analyze and place positions online without the need for a trading platform. All the orders are executed with low latency and ease.
A Few points to Keep in Mind
Before diving into the trading strategies, we must cover a few important statements that traders should note.
- A trading strategy can work under certain market conditions and fail in others. It requires consistent patience for a trader to adapt according to the varying price action
- A trading strategy may perform exceptionally well for one trading pair while failing on the other
- Traders can not ignore risk management and psychology at all costs. A trading strategy will only work if the investor maintains his risk and has a good mindset.
Traders who tweak the lot size or go against their strategy can expose their accounts to a high drawdown or even margin. Sticking to one game plan for the long term and keeping it under your belt will ensure consistency for the long term and keep you within the 10% of winners.
Important Trading Strategies
Let us take an insight into different strategies that can work on most financial assets.
Fundamentals
Fundamental strategies include accounting for all types of economic events. For example, forex traders will look for GDP, interest rates, retail sales, non-farm payroll, etc. Stock investors are seen looking for potential earning reports, dividends, etc. These types of traders usually trade for the long term and hence are classified into swing traders.
Traders are also using level two market data for future and stock trading. Using the said, they can spot a big buyer or a seller and take the same position as them.
Technical
Technical traders are most diverse. They can use their knowledge of trading one instrument and apply it to others in most cases. They use support, resistance, supply, demand, Fibonacci intervals, trend lines, and candlestick patterns for scanning the markets on the charts. Different time intervals are also utilized for the sole purpose of finding a better play.
Technical traders can adapt swing, day, and scalping approaches. Scalpers are usually seen on lower time frames which swinger are at higher charts.
Image 1. A technical trader is scanning the daily chart for trading opportunities. He has plotted weekly and daily key levels that are highlighted with black and red lines.
Trading indicators are also frequently employed to find technical setups. A good example would be the implementation of moving averages and RSI for trading. Traders utilize the RSI for finding overbought and oversold conditions and, at the same time, use the MAs for trends and reversals.
Image 2. A trader finds an oversold condition on the RSI indicator at the daily chart on USDCHF. He looks at the upward trend on moving average and then waits for a slight retrace and bullish engulfing pattern before taking a buy.