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Most popular Trading Strategies

BREAKOUTS

Breakouts are one of the most common techniques used in the market to trade. They consist of identifying a key price level and then buying or selling as the price breaks that pre determined level. The expectation is that if the price has enough force to break the level then it will continue to move in that direction. The concept of a breakout is relatively simple and requires a moderate understanding of support and resistance.

When the market is trending and moving strongly in one direction, breakout trading ensures that you never miss the move. Generally breakouts are used when the market is already at or near the extreme high / lows of the recent past. The expectation is that the price will continue moving with the trend and actually break the extreme high and continue. With this in mind, to effectively take the trade we simply need to place an order just above the high or just below the low so that the trade automatically gets entered when the price moves. These are called limit orders.

It is very important to avoid trading breakouts when the market is not trending because this will result in false trades that result in losses. The reason for these losses is that the market does not have the momentum to continue the move beyond the extreme highs and lows. When the price hits these areas, it usually then drops back down into the previous range, resulting in losses for any traders trying to hold in the direction of the move.

RETRACEMENTS

Retracements require a slightly different skill set and revolve around the trader identifying a clear direction for the price to move in and become confident that the price will continue moving in. This strategy is based on the fact that after each move in the expected direction, the price will temporarily reverse as traders take their profits and novice participants attempt to trade in the opposite direction. These pull backs or retracements actually offer professional traders with a much better price at which to enter in the original direction just before the continuation of the move.

When trading retracements support and resistance is also used, as with break outs. Fundamental analysis is also crucial to this type of trading. When the initial move has taken place traders will be aware of the various price levels that have already been breached in the original move. They pay particular attention to key levels of Support and Resistance and areas on the price chart such as ‘00’ levels. These are the levels that they will look to buy or sell from later on.

Retracements are only used by traders during times when short term sentiment is altered by economic events and news.  This news can cause temporary shocks to the market which result in these retracements against the direction of the original move. The initial reasons for the move may still be in place but the short term event may cause investors to become nervous and take their profits, which in turn causes the retracement. This then offers other professional investors an opportunity to get back into the move at a better price, which they very often do.

Retracement trading is generally ineffective when there are no clear fundamental reasons for the move in the first place. Therefore if you see a large move but cannot identify a clear fundamental reason for this move the direction can change quickly and what seems to be a retracement can actually turn out to be a new move in the opposite direction. This will result in losses for anyone trying to trade in line with the original move.

POSITION TRADING

Position trading takes the momentum style of trading and further eliminates the importance of the entry. The primary concern of the trader here is to be in the market when the price does eventually make its move. Traders often build their position into the market over a period of days or weeks as the price moves. The main component of this strategy is a confidence in the prevailing fundamental conditions driving the price, and the anticipation that the market will eventually move in the desired direction.

This sounds extremely similar to the momentum style of trading but the key difference is the approach to entries that position traders very often take. When the market is expected to move in a single direction over a sustained period of time, traders will very often begin trading that asset almost immediately in extremely small sizes.

The reason for this is because during the long term move there will almost certainly be short term retracements and temporary adjustments to sentiment. These events will provide traders with multiple opportunities to trade the asset as it pulls back against the overall move. These will be used as opportunities to trade at a better price and build up their position in the market while these temporary events cause confusion and loss of confidence. Position traders are effectively taking advantage of human emotions which causes most traders to liquidate positions and take profits during short term market moves against the prevailing trend.

Because the market moves in this way, traders will try and add to their positions as the price can gradually build up for a better average entry price. This also means that their initial positions may enter sustained periods of draw down, which is why each individual position is usually very small in relation to the amount of capital they are trading.

Position trading should only be carried out on assets that have a very clear fundamental sentiment that is likely to last over the approaching weeks or months. Having the confidence to not only hold your position, but add to it is the key to this style of trading.

REVERSALS

Reversals are generally used by technical based traders during times of little fundamental activity. At these times the markets tend to ‘range’ or move sideways with no clear direction. Traders look for key price levels that they can use to trade directly from in expectation of a ‘bounce’ when price hits it. These bounces provide small, quick opportunities to take a profit from low volume market activity. Again, the tools used for reversal trading are almost identical to those used in the previous strategies and include support and resistance and fundamental analysis.

Before trading reversals, you must be sure that there is no major news expected to be released during that session, and that no key monetary policy makers are speaking or making comments to the press. These events can trigger moves that will result in losses on your short term trading. Once the fundamental picture is clear, we then need to focus on the technical analysis and in particular the support and resistance levels that are near current price.

Common levels used by traders with this type of strategy include, old highs and lows from previous trading sessions, Pivot point levels, Fibonacci levels and areas at which all three of these levels overlap. These overlaps are known as confluences, and these provide excellent areas at which to look for the price to bounce from during the session. The reactions vary but very often traders will be looking for only a few pips of profit from these reactions, rather than attempting to hold the positions over several trading sessions.

Trading reversals is strictly for times when the market is not trending in a clear direction, and should not be employed during all market sessions as this will dramatically increase the amount of losses you endure.

MOMENTUM

Momentum trading is much less concerned with ‘precise’ entries and more with the force and continuation of the move. Traders are not looking for the price to pull back or break out from any specific price, but merely to start moving more or less in the direction of the prevailing trend. This type of trading is fundamentally based but also relies heavily on indicators such as moving averages and oscillators to give trading signals.

Traders will use momentum based strategies when they perceive a long term move to be taking place on the asset that they are trading. For example, if there is a significant change in the fundamentals of a nation that will result in an interest rate change, this will cause investors to act and begin buying or selling the currency of that nation in line with those changes. Other examples include geo political events that remain in place for many months and sometimes even years. During these significant shifts, professional traders will be looking to trade these currencies over the long term, often holding their positions over a period of weeks and months.

Because of the longer term nature of this strategy traders are not as concerned about entry points and simply wait until minor technical analysis gives them an opportunity to profit from the move. A popular indicator for this type of trading includes the 200 period moving average, and very often traders will look for price to break above or below this moving average in line with the anticipated move, at which point they will enter the market and hold their positions.

Exits are generally governed by fundamentals in a similar way to entries, with traders watching the economic and geo political events very closely before deciding which trading approach they will take and how they will manage those ongoing positions.

The crypto currency market continues to be a popular asset for traders these days. More and more people are starting to trade crypto across the world after the bitcoin popularity in 2018.

But what exactly is cryptocurrency trading? You may be asking yourself how to trade cryptocurrency? Or what is a good trading platform? A lot of traders also want to know what the difference is between crypto trading and buying crypto currencies? Plus with so many crypto coins available, exactly how many types of cryptocurrency are there?

Let’s begin with the key questions, What is crypto currency trading? & How can I trade Bitcoin?

When talking about virtual coins, you should know that there is a big difference between buying crypto currencies and investing in cryptocurrencies.

If someone buys a crypto currency in a platform, they own it, remember that if you do not have the private keys you don't own it.

For example, let’s say you buy a Bitcoin, once the purchase is complete you’ll own the Bitcoin. You can also use that cryptocurrency to buy other goods or services in the market.

If the value of that Bitcoin rises in the market, you’ll have an increased value and the opportunity to buy more things with it.

However, the amount of platforms in the market which offer products that are payable using crypto is quite limited. This is a reason why more people have started investing in crypto, so they can speculate on their value. Investing works exactly like Forex & CFD trading, Bitcoin and other crypto currencies can be traded as CFDs in online platforms.

The most important things to do is to trade with the right strategy and to choose the best broker.

Indices Trading Hours in the United States / Americas

The New York Stock Exchange (NYSE) is based in New York City.

The NYSE is one of the largest stock exchanges in the world, and it is a public entity as of 2019, the NYSE has normal trading hours from 9:30 a.m. to 4 p.m. local time, unless there's an early close due to a holiday.

The Nasdaq is an American stock exchange that serves as a global electronic marketplace for securities trading. Pre-market trading hours are from 4 a.m. to 9:30 a.m. local time, and after-hours trading extends from 4 p.m. to 8 p.m. The normal trading hours begin at 9:30 a.m. and end at 4 p.m.

Canada's Toronto Stock Exchange opens at 9:30 a.m. and closes at 4 p.m. local time, with no break in trading for a lunch period.

Trading Hours in Asia

The Shanghai Stock Exchange opens at 9:30 a.m. and closes at 3 p.m. local time, and it has a lunch period from 11:30 a.m. to 1 p.m.

Japan's Tokyo Stock Exchange opens at 9:00 a.m. and closes at 3 p.m. local time, with a lunch period from 11:30 a.m. to 12:30 p.m.

The Hong Kong Stock Exchange opens at 9:30 a.m. and closes at 4 p.m. local time, and it has a lunch period from 12 p.m. to 1 p.m.

Trading Hours in Europe

A list of major market indexes can be useful whether you're looking for index mutual funds or exchange-traded funds (ETFs). It can be helpful if you want to know which index to use as a benchmark for your portfolio.

An index is not an investment in and of itself. It's a measure of performance for a certain set of securities. It's a sampling. Index funds will invest in the same securities as the underlying benchmark index. These are the most common indexes used in 2021.

The Dow Jones Industrial Average

The Dow Jones Industrial Average is a stock index that represents the average price movement of 30 large companies across industries in the U.S. Named after Charles Dow and Edward Jones, this famous stock benchmark is also known as Dow Jones, the Dow 30, or, as it's most often called, "the Dow."

Serious investors, such as technical and institutional traders, don't hold the Dow Jones in awe as much as the mainstream media does. Newscasts and wide-read print media can simply provide a headline, such as "The Dow Hit a New Record High Today." Consumers will know what that means.

The S&P 500 Index

Known as "the S&P 500" or simply "the market," the Standard & Poor's 500 Index is the most common benchmark for the large-cap segment of the U.S. domestic stock market. The index represents about 500 U.S.-based companies. It covers about 75% of the U.S. equity market.

The Nasdaq