As a trader enthusiast, you may feel confident in your knowledge of the markets. You might have your favorite indicators, preferred time frames, and risk management rules.
But do you know how to adapt to changing trends, volatility, and news events? Do you know how to exploit the hidden opportunities that other traders miss?
This article will reveal five trading strategies you must know before starting trading. These are not just random tips or tricks, but proven methods that successful traders have tested and refined over time, and have proven effective, when employing the Olymp Trade fixed time strategy. So read on and discover the secrets of trading success!
Trend Indicator Strategy
Following the trend is one of the most basic and effective trading strategies. The trend is your friend, as they say, and it can help you identify the direction and strength of the market movement.
However, trends are not always clear and consistent. Sometimes they change direction, pause, consolidate, or reverse completely. How can you tell when a trend is forming, continuing, or ending?
The answer is to use trend indicators. Trend indicators help you measure and visualize the trend on your charts. They can be simple moving averages (MAs), exponential moving averages (EMAs), or more complex indicators like the moving average convergence divergence (MACD) or the parabolic SAR. The key is to use multiple indicators to confirm the trend and avoid false signals.
For example, you can use a long-term MA (such as the 200-period MA) to define the overall trend direction, a medium-term MA (such as the 50-period MA) to identify the current trend phase, and a short-term MA (such as the 20-period MA) to spot entry and exit points. The idea is to trade in the direction of the dominant trend and avoid trading against it.
Also Read: What is Super Trend Indicator – Strategies, Calculation & More
Oscillator Strategy
Oscillators are indicators that measure the speed and direction of price movements. They can help you identify overbought and oversold conditions, divergence signals, and reversal points. Oscillators are especially useful for sideways or ranging markets, where trends are weak or absent.
Some of the most popular oscillators are the relative strength index (RSI), the stochastic oscillator, the commodity channel index (CCI), and the awesome oscillator (AO). Each oscillator has its own formula and parameters, and you should learn how each one works before using it in trading.
The general rule is to buy when the oscillator is oversold (below a certain level) and sell when it is overbought (above a certain level). You can also look for divergence signals when the price and the oscillator move in opposite directions, indicating a potential reversal.
Price Action Strategy
Another powerful and versatile trading strategy is to use price action. Price action studies how prices behave and react in different situations. It involves looking for repeated price patterns over time, such as support and resistance levels, trend lines, channels, breakouts, pullbacks, candlestick formations, chart patterns, etc.
Price action can help you understand what is happening in the market without relying on any indicators or external factors. The key is to identify the dominant price structure and trade accordingly.
For example, suppose the price is in an uptrend. In that case, you can look for higher highs and higher lows, draw an ascending trend line or channel, wait for pullbacks to support levels or moving averages, look for bullish candlestick patterns or chart patterns (such as flags or triangles), and enter long trades with tight stop losses and generous profit targets.
News Trading Strategy
News events like economic data releases, central bank announcements, political events, and natural disasters significantly impact the market. They can cause sudden and significant price movements, creating opportunities for traders to profit from them. However, news trading also involves risks such as slippage, spread widening, gaps, and whipsaws.
News trading requires a lot of preparation and discipline. You need a reliable source of news information, like an economic calendar, a news feed, or a news scanner. Some of the great news sources are paid for.
You need to know which news events are essential and how they affect the market. You also need quick internet, the ability to think on your feet, and the flexibility to adjust quickly to new circumstances.
Using a directional bias strategy (analyzing market sentiment before the news release and placing a sell or buy order in the anticipated direction) to profit from the news outcome’s price reaction is risky. You could be wrong and lose a lot of money.
Pair Trading Strategy
Pair trading is sophisticated and based on the price correlation between two stocks, currencies, commodities, etc. The goal is to find two highly correlated instruments that move in the same direction most of the time but occasionally diverge (move in opposite directions). The divergence creates an opportunity for pair trading.
It involves buying the instrument that is undervalued and selling the instrument that is overvalued when the divergence occurs. The instruments are expected to eventually converge to their average correlation level, resulting in a profit for both trades.
Pair trading works in any market if the instruments are highly correlated. You just need to do your research, make a concrete analysis, and have a clear trading plan with entry and exit rules.
Conclusion
Trading is not an easy endeavor. It calls for a high level of education, expertise, experience, and self-control. It also requires many strategies to help you cope with different market situations and scenarios.
The strategies discussed above are not foolproof or guaranteed to work every time. They have limitations and challenges, may not suit your personality or style, and may not work well with your other strategies or tools.
However, these strategies are also valuable and powerful. They can help you improve your trading performance and results, and you can exploit the hidden opportunities that other traders miss.
The key is to master these strategies on a demo account, learn how and when they work best, and combine them with other techniques or tools that complement or enhance them.
