Technical analysis and trading gurus always advise to main discipline to be a successful trader. But, it is very difficult and sometimes seems impossible to main discipline when you are trading. Here, a proven trading strategy comes into the mix of things. A well-reasoned and backtested trading strategy are what you need to maintain trading discipline. It is a kind of rope that you can stick to jump across the board of success. How does it happen? It happens because you strictly follow the protocols when you are confident about your trading strategy. Proven trading strategies are a must-have to success in trading.
- Many strategies can help you make money with trading.
- Always make sure your trading strategy matches your context and needs.
- Keep in mind you should test any new strategy before to risk money on it.
The following are the top trading strategies of 2021 that can help you achieve success in trading. Those strategies can also help you to define your trading strategy.
Swing trading strategy
Trading guru and one of the most successful traders Jesse Livermore once said that big swings of the market made big money. He applied some top swing trading strategies that earned him a fortune. That means swing trading strategies can be very effective and fruitful for you as well.
Swing trading strategies are very simple and straightforward. Swing traders use an intermediate timeframe and identify market trends to enter trading positions. They try to capitalize on prices swinging upwards or downwards. The best thing about swing trading is that it works on the blend of various day trading components with the position trading speed.
What are the best swing trading indicators?
As swing traders try to capitalize on mini trends arising between highs and lows. For that purpose in mind, they need indicators that can identify new momentums as quickly as possible. The following indicators suit swing trading.
- Moving averages
- Ease of movement
- Relative Strength Index (RSI)
- Stochastic Oscillator
Some tried and tested swing trading strategies
- Use Fibonacci retracement pattern to identify support and resistance levels and also identify possible reversal levels. 23.6%, 38.2%, and 61.8% are the ratios that can reveal potential levels of reversal. 23.6% is your support level while 61.8% is your resistance level. You can enter a short-term selling position upon observing price retracing to and bouncing off the 61.8% retracement level. Your aim of this entry should be to exit this position when the prices will decline and bounce off the 23.6% threshold.
- You can swing trade on support and resistance levels. You should look to enter a buying position on the bounce off the support line and place stop-loss below the support line. Conversely, you can enter a selling position when the prices bounce off the resistance line. You should place a stop-loss above the resistance line.
- Channel trading is another useful swing trading strategy. This strategy requires traders to identify stocks showing strong trends and are trading within a channel. When you plot a channel around a negative or bearish trend, open a selling position once the price bounces down off the channel’s top line. It is important to note that channel swing trading requires you to always trade with the trend.
- Using simple moving averages is another handy swing trading strategy. It is best practice to use two moving averages with a 10 and 20 days period. The crossover by shorter 10 days SMA crosses above the longer SMA, it is a signal to buy. When the shorter SMA crosses below the longer SMA, it a sell signal.
- MACD crossover is also a useful swing trading strategy. As we already know that MCAD consists of two moving averages, a signal line, and an MCAD line. The crossover by MCAD line above the signal line indicates a bullish trend and you should consider entering buying position. The crossover by MCAD line below the signal line indicates a bearish trend and you should enter a selling position.
Trend following trading strategy
The trend-following trading strategy is the strategy that made millions for some market wizards. For example, Jesse Livermore or Richard Dennis and many others made millions through this strategy. So, this is a worth trying trading strategy.
The trend-following strategy works on trend identification while keeping tight control over risk. It is a proven fact that price patterns repeat themselves and trend followers capitalize on this fact.
What are the best trend-following trading indicators?
There are several indicators that you can use in this strategy. A few of them are:
- Moving averages
- Bollinger Bands
- On Balance Volume
Some tried and tested trend following strategies
- Moving averages provide a clear shot at choosing between going long or short. You can take a short position when the prices are below the moving average during a downtrend. Conversely, take a long position when the prices are above the moving average during an uptrend.
- Bollinger Bands consists of three lines, upper, middle, and lower bands. It plots upper and lower bands 2 standard deviations away from the middle band. Those two bands plot market volatility. When the volatility is high, the distance between the lines widens and vice versa. Higher volatility indicates quitting the trade and vice versa.
- When using MCAD, it is best to always take short positions during an unstable market where prices frequently fluctuate.
- RSI oscillator gives you an idea of the most recent performance of a stock or security. It gives you the strength of a trend in measures ranging between 0 and 100. You can initiate a selling position when the market is overbought and RSI values are above 70. Conversely, initiate a buying position when the market is oversold and RSI values are below 70.
Day trading strategy
The Day trading strategy is one of the best trading strategies for active traders who want to trade during day time. Day traders try to capitalize on the price fluctuations between the opening and closing of the market. They may open multiple trading positions during working hours but don’t leave open positions during the night to control risks.
What are the best day trading indicators?
There are multiple indicators that can help you in day trading but the following are our top indicators.
- Moving averages
Some tried and tested day trading strategies
- Breakout strategies are among the best day trading strategies. You can enter a long position when the prices break above the resistance level. Conversely, you can enter a short position when the prices break below the support level. However, it is also crucial to find the right instruments for breakout trading.
- Scalping is another useful but risky day trading strategy. The driving force for this strategy is quantity. You can enter selling as soon as your trade becomes profitable.
- If you can remain aware of the upcoming news and earning announcements, a momentum trading strategy is good for you. There are a lot of opportunities out there in the market because there are always a few stocks there that move around 15 to 30% daily. You can hold your position until you get signals of possible reversal and then exit your position.
How to define your trading strategy?
It is very important for traders to define their own trading strategy. As far as trading strategies are concerned, all trading strategies are best but under certain market conditions. You can define your trading strategy by picking a tried and tested trading strategy that suits your personality, level of discipline, capital, working hours, and risk tolerance. You can test all of those trading strategies and select any one of them according to your personality traits. However, it is necessary to be adaptable and change your trading strategy when needed.