Opening a trade on the financial market can be a worthy and rewarding investment, if you do your research, and apply fundamental and technical analysis to your trades. A well-developed understanding of the markets, the factors that affect them, and the risks involved will provide you with the best chance of making a significant return on your investment and avoid losing capital.

The Most Popular Trading Strategies

If you’ve never traded on the financial market before, then it can be helpful to open a demo account with an online trading platform, work out your preferred trading style, and get to grips with the landscape of the market, without investing your own money.

Once you’ve got an understanding of your trading style, you can consider executing a trading strategy. Whether you’re wanting to participate in oil trading, stock and shares, or the forex market, to name a few, implementing a trading strategy can help you to make consistent, informed decisions, based upon the data that you choose to analyze. There’s no ‘one size fits all strategy, so to help you to figure out which strategy suits you best, here are some of the most popular trading strategies out there.

Day Trading

Day trading does exactly what it says on the tin, as you’ll be required to open and close your position on the financial market in a single day. This trading style works for those who have the ability to watch for market fluctuations throughout the day and respond quickly, in order to benefit from short-term opportunities.

The most common practice for day traders is to make a collection of small trades throughout the day and implement procedures such as a ‘Close at Profit, which closes a trade and secures all potential profits, and ‘Close at Loss’, which is a risk-avoidance order which will close your trade should you experience a loss, at the levels you set. Of course, like any investment in the financial market, day trading can be risky, because prices can change dramatically and extremely quickly, but equally, these movements can pose as opportunities to make some healthy profits.

Swing Trading

The key to swing trading is to examine fundamental analysis and attempt to identify upward and downward trends in the market. Once you’ve identified these patterns, you can use them to make well-informed decisions with regards to when you should open or close a position. Swing trading typically focuses on short or medium-term gains in the financial market, and the lifespan of these gains can range from a few days to a number of weeks.

This strategy is appealing to those who don’t have time to participate in day trading, which requires you to watch the market throughout the day. Additionally, this trading style can be highly profitable because it allows you to take advantage of short-term swings in the market.

Position Trading

A medium-term strategy that can see you hold a position in the market for anywhere between a few days to numerous months, is Position Trading. Traders who implement this strategy base their decisions upon market trends. For example, if there is evidence that a particular financial instrument is appreciating in value, a position trader will tend to assume that this trend will continue for a prolonged period and open a position.

This form of trade also requires you to closely examine fundamental analysis, including macroeconomic factors and key events in the economic calendar, which can cause prices to fluctuate. Since this strategy does not require you to analyze short-term market changes, it suits those who don’t have time to spend checking the market on a regular basis. However, because it requires you to have a well-developed understanding of fundamental data, it will require you to have extensive trading experience.