- 1 year, 3 months ago adminKeymaster
Main Trading Strategies
October 21, 2014 00:31
We are glad to welcome readers of our blog. Today’s publication will be aimed primarily at beginners – what is the trade strategy, its importance for the trader and the nuances of choosing a trading strategy. Let’s start with the basics – with the definition. As we know, the trading strategy is a combination of market analysis tools and rules, which the participant adheres to to work in the stock market. De facto, the trading strategy is the decision-making model.
In fact, the trading system consists of three different factors that determine:
- The moment of entering the marketand the size of the price of entry
- The moment of exit from the market with a profit
- The moment of exit from the market with losses.
Of course, these theses need clarification, but we hope the reader will understand the general direction of thought.
An important point – some traders do not have any set of rules – they build trading on intuition (very important for scalpers). At its core, we have unsystematic trade – we’ll talk about its profitability or lossability later. An important point – as practice shows, the majority of the entrances to the market for beginners (based on intuition) are almost always unprofitable. Intuition must be supported by knowledge and experience in the market. However, it is also not worthwhile to rely too much on strategies and analysis without having experience in using them – it is important to understand the system of their application. Understand the intricacies, do not drain moneywith a deposit in vain. Another question that I would like to raise in this article is whether to use the finished work of more successful traders or to create a trading system? At the stage of development of the market, we recommend that you study the blogs of successful traders, read thematic literature and use third-party developments. Remember, care is paramount!
Successful traders – division of participants
Today, there are two large “castes” of traders in the stock market – speculators and investors. All of them are divided into separate classes according to the subtleties of work and the strategies used – about this later in the article. Let’s turn to investors. According to investors, a competent choice of an investment object (securities for purchase) and keeping them for a long time will necessarily bring a good profit – patience and invested capital pays off repeatedly. Well, such a strategy is not devoid of logic. Long-term investors work in this way – large cash investments are made in securities of promising companies for a long period (from one year). But do not rush to the conclusion – this sphere is not as simple as it might seem. Investormust necessarily:
- Carry out a fundamental analysis
- Take into account the political situation in the country
- Estimate the prospects for economic development
- Carry out a technical analysis (for this it is sufficient to use the monthly schedules of the issuer, in whose securities it is planned to invest).
You can act on the strategy of medium-term and short-term investment. Differences between them are very significant – medium-term investors hold securities from a couple of months to one year, and short-term investors invest money for a maximum of several weeks, analyzing the issuer’s daily and hourly charts.
Speculators – international traders
Speculation in the stock market, as they say, blossoms with a stormy color. The main difference between the speculator and the investor is in the time of holding positions. The company’s balance sheets are not interesting to the speculator. The most important thing for him is price movement. And the dealers will take decisions on the transaction only on the basis of technical analysis of the market. Perhaps, the most famous speculators of the currency market are scalpers. The prerogative of a scalper is paper with a calm, not a feverish movement in the stock market. The scalper uses the difference between the purchase price and the sale price. The essence of the strategy is very simple:
- Shares are bought by bid (bid – the price of demand)
- After purchase, securities are immediately put up for sale at the price of an offer or aska (the bid price).
Also, a well-proportioned number of speculators of the stock market swept the so-called “swing traders.” These people open positions and hold them for several days (more often – hours). Profits swing trader receives from market fluctuations in the value of securities. We continue to review trading strategies and identify the following participants of the stock market – dey-traders. These people trade only within one day, open positions the next day do not remain in 100% of cases. In terms of preferences, dey-traders are the exact opposite of scalpers, because for these market participants there are attractive securities with high volatility, as well as liquidity. Hold positions – no more than a few minutes.
How to become a trader – for beginners
Everyone who has just come to the stock market – as the famous song sings, now you are standing on the “crossroads of seven roads”. What strategy do you choose for yourself, how will you make money in the market – to decide only the trader. However, before making a choice, you need to analyze your capabilities, as well as abilities. Answer the most truthfully to these questions:
- Are you ready to submit to the busy schedule of intraday trading?
- How quickly can you make a decision and are ready to follow it?
- Do you need trading, as such, or are you already engaged in your favorite sphere and strive only to profitably invest your income?
We recommend starting the market development with the analysis of weekly and daily charts.
- Speculation – for those traders who are fully committed to the market.
- Investment – for those who want to invest capitalin the stock market and inflation bypass
Note that experienced scalpers prefer to work in two directions, having several trading accounts. One trading account is designed for aggressive trading, the second one is investment.
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