If you are new to online trading, testing several strategies will allow you to discover the trading strategy best suited to your investor profile. Best Trading Mentor By being aware of the different possible strategies, you will also be able to better understand the decisions of the different market players.
What is a good trading strategy?
Strategy refers to the art of developing action plans (tactics) to achieve a specific objective. In trading, with rare exceptions, the objective of the trader is to achieve direct financial gain (if trading on own account), or indirect (if trading flows). For an investor, a good trading strategy is therefore a winning trading strategy, capable of recording capital gains over the long term.
However, the performance of a trading strategy often depends on the time horizon considered. The same strategy can indeed prove to be a winner over a quarter, but a loser over a year, or vice versa. The implementation of the strategy (tactical phase) may also differ from one trader to another depending on the parameters chosen or the financial products traded.
Directional trading
Perhaps the most popular and simplest trading strategy is the so-called “directional” trading strategy. This approach consists of betting on the rise or fall of a financial product (stock index, share, currency, etc.). When the financial product evolves in the direction anticipated by the trader, the latter realizes a capital gain. Otherwise, it records a loss.
Depending on the investment horizon, a directional trading strategy may focus on very short-term operations called scalping (a few seconds to a few minutes), on short-term operations called day trading (a few minutes over one day), or on medium-term operations known as swing trading (longer than one day).
Arbitration
Rather reserved for professional traders, the so-called arbitrage trading strategy consists of simultaneously buying and selling two identical assets or financial products in order to take advantage of a price difference. During this operation, the trader sells the most expensive asset and simultaneously buys the cheapest asset in order to record a gain without having to be exposed to market fluctuations.
Option combinations
Rather reserved for professional traders too, the "optional" trading strategy consists of buying or selling combinations of options in order to bet on the evolution of one of the parameters of the price curve (often volatility). Traders then call on the Greeks to measure the risks implied by each option.
Without having to bet on the rise or fall in prices, the trader can then simply bet on the parameter of his choice, whether it is the evolution of volatility, the evolution of interest rates interest, or another factor identified and isolated by the trader.
Read More: The Best Course To Learn About The Stock Market
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Swing traders typically use technical analysis to discover the best and safest stock market investment, but in this instance, we combine technical and fundamental analysis to determine the best and safest stock market investment.
We tested our strategy using more than two decades of data, and it outperformed the S 500.
