Are you a new trader that’s still trying to figure out which strategy will work best for you? Or perhaps you’ve been trying something that just isn’t working well and you’re looking for a strategy that works better with your own personal trading style. Below, we will outline some of the most popular trading strategies, along with their pros and cons to help inspire any trader that needs to switch up their strategy. In this article, we will talk about the following strategies:
- Price action trading
- Range trading
- Trend trading
- Position trading
- Day trading
- Swing Trading
First, you’ll need to understand that each strategy is unique in its own way. Some strategies require more of a time investment, while others won’t require as much time in front of your computer. You’ll also find more trading opportunities and different risk to reward ratios, depending on the strategy you choose.
Price Action Trading
Traders that use this strategy typically look at historical price data on charts in order to form more technical trading strategies. In some cases, traders look at fundamentals like economic events, but they usually stick with historical data. The technique can be used alone or in combination with indicators. Traders use Fibonacci retracement, candle wicks, indicators, trend identification, and oscillators in order to define support/resistance levels for entry and exit points when using this strategy. One of the benefits of using this strategy is that it can be incorporated over short, medium, or long-term time periods, and several other options on our list fit within this category.
Range trading traditionally uses technical analysis in order to define support and resistance levels that inform traders where to enter and exit trades. Traders often use oscillators in combination with this strategy, with RSI, CCI, and stochastics being the most popular choices. This is yet another method that can work with any time frame, but it does require a lengthy time investment per trade. There are some things to look out for, as the strategy is most successful when the market is calm with no detectable trend and it is very important to have a strong risk-management plan in case breakouts occur. On the bright side, there are many trading opportunities and there is a good risk-to-reward ratio with range trading.
Trend trading is considered a simpler trading strategy with the goal of making profits by exploiting the market’s directional momentum. Traders using this strategy calculate their entry points using oscillators, while exit points are based on the risk to reward ratio. Multiple timeframes can be used, although this strategy most commonly used medium to long-term timeframes.
Position trading mainly focuses on fundamental factors and especially economic circumstances without paying attention to minor market fluctuations. This is a long-term strategy that judges entry and exit points based on technical analysis and other strategies.
This popular strategy involves opening and closing one or more trades within the same trading day, making it a short-term strategy in which trades are opened from minutes to hours within the same day. Traders use different means to determine entry and exit points when using this strategy.
Scalpers try to profit from small price changes by placing multiple positions per day. This short-term strategy prefers more liquid forex pairs because they generally come with tighter spreads. Scalpers define entry and exit points by defining the trend, often in addition to using indicators and oscillators.
Swing traders hold positions anywhere from a few hours to a few days while attempting to profit from trending markets and range bound. Traders typically favor long-term trends as they provide more of an opportunity to capitalize. Once again, indicators and oscillators are primarily used to calculate entry and exit points.