Discover four effective strategies for online traders
Trading Strategies Every Trader Should Know
India has a growing community of online traders. This year, due to COVID-19, remote tools for money-making are all the rage. International markets may bring a hefty profit to traders with consistent strategies. Discover four trading styles worth considering today.
News Trading Strategy
Today, news travels very quickly. Traders capitalize on major events if they foresee in what direction these sway the market. Usually, the action is taken once a story appears, or in advance. Some experts will recommend you take action before a rumoured announcement is made. This protects you against excessive volatility that may ensue.
Political and economic reports may change market expectations, causing prices to rise or fall. Changes in interest rates, oil prices, trade deficits, etc. are consequential. To trade the news, you need to be particularly flexible and able to think on your feet.
Fundamental traders devise special strategies for specific news releases. Bear in mind that the market sentiment can play a larger role than any media information. The latter drives the market, so it is often already included in its prices. Analysts need to react promptly and understand multiple interconnections between fundamental factors and currency rates.
Pros and Cons
First, you can have a definite strategy for entry and exit. Your behaviour is based on the market’s reaction to the news. These conditions are usually outlined in a trader’s plan.
Secondly, trading opportunities are diverse. Every day, the media bombard us with news events and economic releases. Trading terminals condense relevant information, so you can check your economic calendar to stay up-to-date. Still, news trading is imperfect because of overnight risk and the need for expert skills.
Swing Trading Strategy
Swing traders buy low and sell high — hence the name. The currency market rises and falls all the time, changing from overbought to oversold conditions. Technical indicators, price charts and individual movements help traders evaluate the big picture.
They interpret the length, duration, and momentum of every swing to spot support and resistance. Swing traders also need to identify trends where supply or demand rises.
When a trend looks robust, traders may hesitate to join it. Should they wait for some pullbacks? Generally, chasing prices is not advisable. Luckily, Fibonacci retracement tools help them make a choice. Such tools are offered by brokers like ForexTime.
Traders look out for ‘pullbacks’ and ‘dips’. When the momentum reaches a new high, they usually buy the first pullback. In case of a new low, the first rally triggers selling.
Pros and Cons
Swing traders may leave their positions open for days or weeks, which makes this strategy suitable for people pushed for time. The risk-reward ratio is also decent, and trade opportunities are plentiful. You can go long or short across several instruments.
Still, success requires research based on oscillation patterns. Swing traders may expose themselves to overnight risk unless they use stop loss and ForexTime Forex trading strategies.
Day Trading Strategy
For day traders, Forex becomes a full-time job. As the term suggests, they are active throughout the trading day and finalize all their positions before the closing bell. To make lucrative decisions, traders study the market before it opens. They need to predict the effects of overnight changes. The trades themselves normally last for 1-4 hours.
Pros and Cons
First, there are no overnight risks, and you open as many trades as you like. For instance, initiate 5 trades and close them once your target is reached, or they are stopped out. Like other strategies, day trading applies to different markets beyond Forex.
The first drawback is the possibility of flat trades. If the market does not move much, your profit may be miniscule. Secondly, you need to be well-organized and follow a consistent plan with rigid risk limitations.
End-of-Day Trading Strategy
Advocates of this strategy postpone action until the final minutes of the market day. They open positions when they see that the price is about to settle or close. Traders compare price action of the current and the previous days to make predictions.
This system requires less time than news trading. Price charts are analysed in the beginning and at the end of a trading day. Orders include rigorous risk management parameters. Stop loss and take profit reduce your overnight risk.
Pros and Cons
First, this strategy is uncomplicated, so it is even suitable for newbies. Secondly, you need to analyse the charts in the morning or at night. Still, adverse changes may result in overnight losses unless you program stop loss.
The Bottom Line
There is no single recipe for success in online trading. Still, it is a viable opportunity to make money from the comfort of one’s home. Try these strategies in the demo mode, and discover more systems.