The Stock Trading strategies is essential to earn and grow your capital over the long term. Unfortunately, having a strategy is one of the basics of investing that most newbie traders don’t have. This results in significant capital losses because a novice trader will have no method to enter a position, especially when exiting the market.
We are going to offer you the secrets to preparing a good trading strategy and thus guarantee you better profits for your trading account.
By reading this article, you will learn
The Difference Between a Strategy and a Trading Plan
Types of existing trading strategies
The methodology to define the long-term and short-term roadmap for your stock market investments
So let’s get started immediately, and you’ll have more confidence in trading the stock markets.
The Basics for Defining a Stock Market Strategy
First of all, let’s set the scene. Indeed, in our opinion, there is an amalgam between the trading plan and the trading strategy. This is why it is necessary to define these concepts well because it is not the strategy that will make you take positions on a stock market index.
Definition of the Trading Strategy
The trading strategy is simply the philosophy of your financial investments or your investments. You will adopt this vision to carry out and place your orders. The trading strategy is based on several criteria. It will evolve according to market conditions and investor psychology and the stock market cycle in which the asset(s) you are trading evolves.
A novice or professional trader must systematically have a strategy for trading or speculating on the markets. It determines the method for taking a position on a stock market action, an index or a derivative such as futures. In addition, each underlying will have a different strategy because the nature of the asset is subject to generally different fundamentals.
Difference Between a Trading Plan and a Trading Strategy
You have to know the difference between a trading plan and a strategy. It is from the trading strategy that you will establish your plan. Although strategy gives you the method to take a position, the plan will tell you where and when you will enter the market.
With a plan, you know the support and resistance zones in which you will look for a buy signal or sell signal. And all this according to your strategy.
What are the different Trading strategies that exist?
We have seen above a possible trading strategy. But there are many more:
The trend-following strategy is the easiest to implement. You can enter a market that has a long-term bullish move or bae an arish move. For this, the strategy of following the trend of the asset is based on rebounds on moving averages or on the breakout of chart figures such as the bullish or bearish channel. Crossing trend lines is also possible.
Another is the buying strategy. That is to say that you will only look for buy signals on several types of stock market assets. It also allows you to have a diversified portfolio.
Conversely, it is also possible to have a selling strategy on the markets. So you will systematically look for sell signals by taking advantage of the increase in volatility and investor uncertainty.
Finally, another much more difficult strategy is countertrend trading. Speculation is done on the corrective movements of a market in the short term. This is often suitable for intraday trading techniques or scalping.