What Are The Best Stock Trading Strategies Out There?

The goal of a trading strategy is to bring profits
Any trading strategy must be consistent with the trader's personality and discipline
Trading Strategy is a complete trader's guide
There are dozens of different strategies used in stock trading

Top Stock Trading Strategies Listed

Each trader chooses a trading strategy that suits his/her needs, trading style, and market conditions. Only under ideal conditions can various trading strategies bring success in the stock market. Successful trading strategies can help investors spot profitable opportunities in the markets. By applying proven strategies, the average investor can take advantage of some of the techniques that professional traders use and take part in reaping these benefits. Even the most seasoned traders are aware that investment strategies can fail, however, certain techniques may work better than others under specific market conditions.

Trading On News

Trading on the news is one of the most popular strategies for both novice traders and those who already have some experience in the financial markets. The essence of this method is to open deals during the period of publication of important macroeconomic statistics and place trades on the growing volatility and trend impulses that may form during this period. Economic and political news are some of the most popular incentives for changes in financial markets. Reports of rising inflation, falling central bank interest rates, rising unemployment, litigation, or a worsening international situation always generate excitement among traders. A particularly strong reaction can be observed in the foreign exchange markets. It would be surprising if a separate trading strategy did not arise on the basis of such a powerful factor. In a news trading market strategy, the decision to buy or sell an asset is made in anticipation of the release of important economic information that improves or worsens an asset’s price and value. Basically, news trading is carried out in the Forex market, where the currency of the country from which the news is expected stands against the basis. Trading on the news has certain advantages and a number of disadvantages. The popularity of the news trading strategy is due to the fact that it does not require preliminary preparation - you can start working almost from scratch.

Swing Trading

Swing traders select instruments to trade based on a variety of factors - fundamental, news, and technical. During stock picking, you should not go too deep into it, but rather focus on the technical picture. Swing trading uses a variety of tools and strategies. But any strategy is based on the theory of market cycles. The essence of this approach is to understand that the movement of markets is not straightforward, but cyclical in nature. The market is run by two forces: greed and fear. Rising prices awaken greed, distorting the real value of assets while falling prices awaken panic and fear. The ups and downs are replaced by periods of correction when the influence of instincts is replaced by the voice of reason. Swing traders use the mood of the market crowd to predict the direction of further price movement, as price fluctuations clearly fit into the structure of the Cycle Pattern. Quotes move in accordance with an increase or decrease in supply and demand. The balance between buyers and sellers leads to price consolidation in a certain range. Any imbalance causes the price to go beyond the consolidation zone and move upward or downward.

Momentum Trading

The stock exchange in terms of momentum trading has its own characteristics and differs from other markets. As a general rule, momentum traders trade for the first hour after the opening of the session. It is at this time that the maximum volume is concentrated on exchanges around the world. In such markets, traders can view the order book and the transaction tape, where they see the real dynamics taking place in a specific period of time. Important news on the stock market also happens quite often, especially with regard to the payment of dividends and various quarterly earnings reports in a particular organization. Momentum trading is one of the easiest and most effective ways to make a profit in the stock markets, Forex, and other exchanges. Traders who profit from impulses focus on highly active instruments that have the potential for large volume moves. Momentum trading is a trade that involves opening trades during strong and active market movements. Such positions can be held for several minutes or throughout the entire trading session. It all depends on how strong the impulse is, and whether there are prerequisites for a reversal.

Trend Following Strategy

There is a conditional division of classical trading strategies into two fundamental classes: strategies for price return to the mean and strategies for following the trend. The effectiveness of the system, which can be attributed to one of the groups, depends primarily on the structure of the market and the properties of the trading instrument. Thus, the instruments based on the “win-win” partnership model demonstrate an efficient market with a normal distribution of profitability. Rare surges have no persistence and are often false. As examples of such a model, one can cite the currency pairs EUR / CHF, USD / CAD, etc. The economies represented by these currencies are close trading partners and practically do not compete for market shares. But there is a qualitatively different class of instruments, which is based on the “win-lose” competitive model. In addition to trade relations, the economies represented by these instruments are key competitors for capital markets, Asian regions, or other market sectors. This applies to the economies of the EU and the USA. We can also imagine spreads that are specially designed based on competitors, such as the GOOGLE / APPLE stock spread. Such instruments are distinguished by the instability of the flat movement, which precedes the “price flights” and surges of volatility with the formation of long-term trends. This article is devoted to exactly these tools, competitive models, and ways to identify them.

Position Trading

Positional trading is long-term trend trading on charts with large time frames. In positional trading, fundamental analysis (it’s a macroeconomic part) and the technical forecasting method are very often used. This style of trading is used in literally all markets. Positional traders can hold both long and short positions over the long term. In the latter case, they make money by making the asset cheaper. Positional short positions are very interesting during periods of financial and economic turmoil. For example, this style made it possible to make money during the crisis of 2008-2009, when many stock markets were marked by a significant drop in quotations. The essence of positional trading is that a trader opens a position (long or short) in order to get the maximum profit from the main trend. Short-term price fluctuations and corrections are not important for position traders. Instead, they are interested in the main trend itself, which can last for weeks or even months. This approach to trading has its advantages.