TRADING STRATEGIES

Trading Strategies can be divided according to the length of time of each specific transaction. And it can last from a few milliseconds to several years. There are many ways and strategies for trading in the financial markets. They can differ in:


  • the degree of risk and the kind of analysis a trader uses, fundamental or technical,

  • what factors they take into account, and

  • what indicators and advisors are used.


Of course, there are differences in markets and asset classes (commodity, currency, stock or crypto).



High-Frequency Trading

This trading method has become possible with the advent of automated Expert Advisors and high-speed Internet. Even with a super-reaction, a person has nothing to do in this segment since it takes less than a second between opening and closing an order. Only trading algorithms (called robots) can catch the slightest price fluctuations. And here, a lot depends on the quality of the algorithm embedded in them and the coder's skills.

The speed of the computer and the speed of transmission of information and commands also play a role. The closer the computer and the server are to the trading platform (literally, how far is the computer and server to the brokers' server), the better the Internet connection and the greater the chances of making a profit.

Bear in mind that not every broker accepts this trading method. And if you do manage to find such a broker, don't forget about spreads and commissions. Thousands or tens of thousands of trades a day are more likely to make rich the broker than you.

Intraday: Pipsing


First, what is intraday trading? These are short-term strategies when all positions are opened and closed within one day. Both manual trading and automatic trading using robot advisors can be conducted here.


Pipsiping is the shortest option for intraday trading. This strategy is not high-frequency trading, but the goal is to earn at least a few pips (points) of profit on short-term fluctuations in quotes. A pipsing trader can make more than 50 trades per day, lasting from a few seconds to several minutes. And the trade is carried out on minute and even on tick charts.


If we talk about manual trading, the load on the trader is quite significant here: all day at the monitor, plus the nervous tension and excitement of each new trade - when to open, in which direction, guessed or not. Luck plays a rather significant role than technical and fundamental analysis. Do not forget about spreads and commissions in this case, and choose instruments with increased volatility to extract the highest profit from the price impulse. This type of trading can be considered a bet.


In addition, since we are talking about winning just a few pips on each trade, a trader has to use considerable leverage to make a significant profit. And this dramatically increases the risk of losing your deposit. According to statistics, there are very, very few successful traders using pipsing.

Intraday: Scalping and Day Trading

If someone does not know, the scalp is a part of the skin with hair cut off from the enemy's head in ancient times as a trophy. Therefore, the term "scalping" implies the removal of a thin layer of profit from price fluctuations.


This trading strategy is a bit more relaxed but still a stressful way of trading, with an average of 10-30 completed trades within a day. The trader has more time to analyze the market situation at this rate (including news expectations and forecasts, trend analysis, determination of support/resistance levels, etc.). Except for this difference, everything else is similar to pips.

Regarding Day Trading, it involves about 5-10 daily transactions. This method differs from the two previous ones in three points:


  1. When analyzing the market situation, charts with higher time frames are used: M5, M15, M30.

  2. The trader can use less volatile instruments with lower spreads and commissions.

  3. They already have time to analyze the situation and hedge risks using assets associated with the main traded instrument by direct or inverse correlation (CFDs, Options, etc).


Medium Term Trading


Medium-term traders are often referred to as short-term investors if they go long. And if positions are short, they can probably be called anti-investors. Although there is another common name: bulls and bears.

It should be noted that there are discrepancies in the definition of the "average" period. It was believed not so long ago that this is a time interval from several months to several years. However, the speed and technological capabilities of the 21st century have led to the fact that the concept of "medium-term strategy" now implies holding an open position in the period from a few days to a few weeks, less often months.


An obvious plus of such a strategy is that the trader does not need to monitor current prices constantly. There is an opportunity for deep fundamental and technical analysis, which is especially useful for inexperienced beginners and gamblers who tend to succumb to emotions.


One can make a profit of hundreds and even thousands of points following the medium-term trend. At the same time, the trader can "top up" their position in case of short-term adjustments and temporary price rollbacks without using leverage.


The costs of spreads and commissions paid to the broker, in this case, will be many times lower than in the abovementioned strategies.

Long Term Trading


Many financial market gurus believe that short-term strategies are fun for beginners. However, professionals are engaged in long-term investments. Legendary investors like Warren Buffett say that when he buys shares of a stock, he does it with the objective of "Never having to sell it".


This type of trading can most likely be called investing. The priority is not to profit from speculation on the exchange rate difference but to increase the value of the acquired asset and receive dividends on shares and other securities. (Although, if you remember another legend, George Soros, one can become a billionaire in the bear market as well).


It would seem that the advantage of long-term trading is that there are no rules here, and the situation is developing quite slowly. But it is not so. Many unanticipated and unpredictable conditions can occur over a long period, including, for example, a sharp change in the political situation, natural disasters, wars or pandemics. And a lot more can happen in the world over the months and years of owning an asset.


And of course, in long-term trading, relatively large capital is needed, as well as no less impressive stock of patience, and one should not think that it is possible to solve all financial problems in one fell swoop.

Risk Warning:

By investing in or trading financial instruments, commodities and any other assets, you are taking a high degree of risk. You can lose all your deposited money. You should only engage in any such activity if you are fully aware of the relevant risks.

Contracts for Difference ("CFDs") are leveraged products and carry a high level of risk to your capital as prices may move unexpectedly against you. Losses can exceed your deposits, and you may be required to make further payments. 74 - 89% of retail clients lose money when trading CFDs. You should consider whether you can afford the high risk of losing your money. These products may not suit all clients; therefore, ensure you understand the risks and seek independent advice.

  

 

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