By onlineantra
Trading without a clear strategy feels chaotic and downright stressful. It’s like driving blindfolded on a busy highway.
A strategy is your roadmap to success. It stops you from doubting yourself and helps you make moves with confidence. That said, not every trading strategy fits every trader.
The good news? Finding the right trading strategy isn’t that scary. Follow these steps to get started:
Familiarise Yourself With Different Trading Strategies
First things first, know some popular trading strategies and how they work. Here’s a brief breakdown:
Day Trading – It involves opening and closing positions within the same trading day. Traders try to make a handful of profitable trades to earn large profits.
Scalp Trading – It is a short-term style that involves executing dozens and even hundreds of trades in a single day. Traders hold positions for minutes, even seconds. Scalping trading reduces risk exposure.
Swing Trading – It is a speculative strategy that involves generating profits from short- to intermediate-term price movements. Swing traders hold positions from a few days to 1-2 weeks.
Position Trading – It involves holding onto a financial instrument for a long time, hoping it will appreciate in value.
Each trading strategy has its pros and cons. Do thorough research and learn the best practices for each of them before moving forward.
Assess Your Trading Goals
Next, assess your trading and long-term financial goals.
Look at it this way: If you want to make small but frequent profits, day trading and scalping are pretty useful. But if you’re looking to build substantial profits over time, positing trading or price action trading has got you covered.
Most often, beginners practice short-term trading strategies before committing to a long-term structure. Quick wins give them confidence and motivation to keep moving forward.
Know Your Risk Tolerance
Every trading strategy comes with its fair share of risk. This is why it’s important to know how much risk you’re comfortable taking on.
For instance, scalping incurs minimum risks since traders open and close positions within minutes. Day trading carries medium risk since positions are closed within the same day. Lastly, long-term strategies include overnight holdings and are exposed to high risks due to potential market fluctuations.
Consider Resources and Tools Available
Every trader needs resources and tools to assess markets and execute orders. For fast-paced strategies, you need:
- Live charts
- Advanced order execution tools
- Technical indicators
And for long-term trading strategies, you need:
- Economic calendars
- Risk management tools, such as stop-loss orders and take-profit orders
Resources play a critical role, too. From online courses to trading podcasts, seek knowledge from reputable sources and expert traders.
Test Before You Commit
This can’t be emphasised enough. Even if a trading strategy matches your style perfectly, there is a slight chance it won’t work in live conditions. This is why it’s recommended to test before committing to a strategy.
You can use demo accounts or leverage paper trading. This will help you track results and refine strategies.
