To have a stable profit as a trader, you need to test various strategies and choose the one that gives the best results. It is also worth initially defining your personal algorithm of actions: conditions for entering the market and exiting a transaction, the most productive trading time, acceptable risks, etc.
Training
Trading strategies on the exchange may include various action algorithms, but there are rules that remain unchanged.
Before you start trading, you must clearly define the style of the strategy and the goal that must be achieved.
Regardless of the market, goal setting has a common structure:
- Planned income. Many traders lost money due to greed, wanting to earn more. Therefore, it is important to decide how much profit is sufficient to stop trading within a day or a week.
- Determining the entry and exit points of a transaction. Before the order is opened, you need to clearly understand exactly where the exit point is and set take profit. You can enter a deal well, but if you fail to exit correctly, you can lose a tangible part of the profit.
- The maximum risk allowed for a particular deposit. In order to survive in the stock and foreign exchange markets, it is necessary to clearly define the level of losses, below which you cannot fall. This figure should be set for one month, week and day. You need to know your limit and never exceed it. Without risk control, it will not work for a long time in the market.
Risk management
When planning specific transactions, you must always use the 1/3 principle. This means that the profit must be at least three times higher than the established level of possible losses. If the stop loss is $ 50, then the profit should be 150 y. e. and more.
Such an approach will help to steadily go into the plus, since one successful transaction will compensate for three unprofitable ones.
Some traders use a ratio of 1/4 or 1/5, increasing the level of planned profits. As a result, regardless of the strategy on the exchange, the chances of making money and not losing significantly increase.
Scalping
The essence of this trade comes down to working with small time frames (1 m) and concluding a large number of transactions. When choosing this strategy for playing the stock exchange, you need to be prepared for a heavy load, since you will have to process significant amounts of information and constantly monitor the market.
When scalping, price fluctuations on small timeframes are used, which allows you to get a profit even with a relatively calm chart movement. Within one transaction, both profit and risk level are significantly reduced.
For this reason, to obtain a stable financial flow, it is necessary to open many orders. As a result, this style of trading quickly exhausts.
Since technical analysis does not always allow you to determine the entry point, indicators are often used.
Intraday
As part of this exchange trading strategy, price fluctuations within one day are used. This trading style is relevant for both the stock and foreign exchange markets.
Here you can use technical analysis with a significantly greater share of efficiency than in scalping. As for the fundamental analysis, in this case it is not a priority.
Inside the day, you can earn on the timely opening of short positions both for purchase and for a falling market. Using this style, you need to remember to set a stop loss, which allows you to limit losses.
It is also important to keep trade statistics. It is necessary to identify the most effective time within a day.
At first, this may be imperceptible, but many traders who choose the path of intraday have the most productive part of the day. And you can identify it by fixing all the features of the trading process. You need to write everything: the time of opening and closing the deal, stop loss, take profit, how many times it turned out to work in plus and minus. That is a complete detailed picture of each trading day.
Having determined your best time, you need to bet on it. If you ignore this principle, then even using a profitable trading strategy on the exchange, you can have bad results.
Medium-term trading
In this case, the currency and shares are purchased for a period of several days to four weeks. To select an entry point, an analysis of large timeframes is used - daily, hourly and H4. For a more accurate entry into the market, you can analyze a five-minute chart.
Strategies for trading stocks on the stock exchange in the medium-term style are considered the most profitable and stable. One stop loss in this case can bring more losses than with scalping, but the profit is also higher.
With medium-term trading, you can allow yourself to rush to look for good entry points and set a high take profit. Therefore, this style is well suited for those who can not trade all day.
Long term trading
This style is distinguished by working with orders for a period of one month to several years. Such a scheme of working with the market resembles more investment than active trading.
With a competent approach to such a trading strategy on the exchange, you can increase your capital several times in 2-3 years. To successfully trade within the long-term style, you need to be able to competently analyze financial indicators and predict changes in the part of the market where the company whose shares were acquired is active.
Support and Resistance Levels
With all the abundance of trading strategies on the exchange, the use of levels is the basic scheme for making a profit. To find them, you need to pay attention to the maximum upper and lower values of the price, beyond which it does not go for a long time.
To determine the levels of support and resistance, you should use the hourly chart and larger timeframes. But it is best to focus on daylight candles.
Such a scheme of work is well suited for the formation of stock trading strategies on the stock exchange. The foreign exchange market also allows you to use levels to get profit.
The entry point in this case is the end of the level or its breakdown.
If we talk about rebound, it should be noted that it is formed by several candles. When the price touched the indicated level and its movement slowed down, there was no need to open an order, since the reversal was not confirmed. The schedule may go further. You need to make sure that it is the price rebound from the level to which it approached earlier. In this case, the stop is set slightly above the level line.
You can also use pending orders.
In the case of a breakdown, the scheme is the same - entry into the market is carried out only after a few candles close above the resistance level or below the support line.
Using this classic stock exchange trading strategy can be combined with indicators and other styles of working with the market. Levels are well suited for intraday, medium term and help to have a stable profit in long-term trading.
There are other strategies that are often used by traders.
Channel
Its essence is to build a channel. It is formed using lines that draw along the last three extremes - the lower and upper points of the graph.
As soon as the price approaches one of the two borders of the channel, an order is opened in the opposite direction, because according to this strategy of trading on the exchange, the price should deflect from the border and go in the opposite direction.
You need to open only one order and set a small stop loss, about 50 points.
Momentum pinball
This strategy focuses on entering an overvalued or undervalued market.
To use it, you need to install the Momentum indicator. A deal is opened only after receiving a signal from the indicator. To do this, open the hourly timeframe and after closing the last bar / candle create a pending order at a price lower by 20 points from the minimum of the bar.
Stop loss is set 20 units above the maximum. The minimum profit size is 60 points.
Inner bar
Here the emphasis is on analytics without the use of special indicators.
The essence of the analysis is to work with an internal bar, the boundaries of which do not go beyond the previous one. The fact of its appearance indicates a possible change in the direction of movement of the graph. For this reason, the formation of an internal bar can serve as a signal to enter the market.
With this strategy of trading on the exchange, the stop loss is set at the level of the previous maximum, if a sell order is opened, and the minimum when it comes to buying.
To determine take profit - profit taking, - support and resistance levels are used . The calculation is that the schedule will move at least to the next level.
How to work with cryptocurrency
It is possible to successfully trade bitcoin and other types of digital money. To do this, you need to build your strategy taking into account several simple principles:
- Do not ignore the news. Whatever cryptocurrency trading strategy is used, you should always follow the news. Since digital money has appeared recently, unexpected events are possible that can collapse Bitcoin by 1000 y per day. e. and the next day raise its price by $ 2,000. News is important for the reason that cryptocurrency does not have a single legal status. For example, Australia plans to create its own digital money, while China bans Bitcoin. All this affects the price movement and if you ignore such events, you can make a mistake leading to the loss of a tangible part of the deposit.
- Pay attention to volumes. To get a stable profit, it is worth tracking ten cryptocurrencies with the highest trading volumes. This is necessary in order to reduce risks and always have a fallback if, for example, the situation with bitcoin worsens.
- Competently respond to drawdown. If the price has gone down, then, of course, you do not need to buy. But immediately make a choice in favor of the sale is also not worth it. It is better to use leverage to wait and see how the price changes. Despite the fact that fluctuations in the chart are sometimes very noticeable, Bitcoin growth is forecast in the near future. Therefore, a quick sale may be a mistake.
It is important to remember that any strategy for trading on the cryptocurrency exchange includes risk control.
In general, when working with digital money, you can use a style such as scalping or intraday. A strategy based on support and resistance levels can also give good results.
Options
This type of trade has increased risks. At the same time, there are good options trading strategies. The exchange, regardless of the name and currency chosen, is, first of all, the market. Therefore, when working with options, nothing prevents the use of the same schemes of action as during the currency trading.
You can earn in several ways:
- Short call (call option sale). This action must be performed when there is reason to believe that in the spot market the price of the underlying asset will go down.
- Long call (option purchase). You need to buy when market signals indicate an increase in the price of the underlying product.
- Bull Call Spread. The essence of the strategy is that a call option is bought and sold at the same time. At the same time, the execution time should be the same, and the strikes are different - the one that is bought has less. Such a strategy is relevant when there is an expectation of a limited price increase.
Summary
According to statistics, most people lose money on the stock exchange due to neglect of the principles of risk management. As for the choice of strategies, it is better to test them on an account with a small deposit. And you need to stop at one that allows you to have stable results.