Best strategy for long term trading
Millions of buying and selling transactions are concluded on the financial markets every day. Today, the daily volume of transactions exceeds $ 10 billion per day. Bidders receive profit from the difference in rates. Everyone has their own strategies and systems that allow them to make a stable profit.
Today, with the active development of technologies, more and more new trading strategies appear on the financial markets.
Each trader uses his own strategy, which differs in terms of the duration of the transaction, the instruments used, risk, trend and other parameters.
In general, each strategy has its own characteristics that are suitable for certain people.
Types of trading strategies
By time, strategies are divided into 3 main groups:
Long-term strategies are those strategies whose retention period starts from 7 days and ends with 1 year or more. This group of strategies is one of the safest and is often used by professionals. This refers to hedge funds, investment companies and individuals with vast experience and money.
Medium-term strategies are similar in some parameters to long-term ones, but their deals are held for no more than 1 trading week (5 days).
In short-term strategies, trades generally last up to 1-2 days. Now this type of strategy is very popular, as it does not require in-depth knowledge and experience. Short-term strategies are divided into 2 more groups:
Intraday strategies are when a trader opens trades, with the obligatory closing of them at the end of the day. The strategies of this group are quite risky, but they are very profitable. The advantage of such strategies is a very quick profit, which can be formed as a result of any economic or political factors. The main disadvantage of these strategies is intraday noise and fixed costs (spreads, swaps, slippages, stop losses, communication services, etc.).
Scalping is one of the youngest and most complex trading systems on the market. It requires constant control and skill. Scalping strategies are supposed to make super-fast profits in a very short time. Some professionals open from 100 to 1000 trades daily, lasting from 0.1 seconds to 1-2-3 minutes. Such trading requires a clear plan of action and correct money management.
According to the system, trading strategies are divided into 7 main groups:
- Indicator strategies;
- Without indicator;
- Wave strategies;
- Universal strategies;
- Hedging strategies.
Indicator strategies are strategies based on technical indicators. They are ideal for beginners who are just starting out in trading. There are many indicators on the market now, the most basic ones you can find in your terminal.
Without indicators - these are strategies that do not include any technical or mathematical indicators. As a rule, traders who work without indicators open their trades on understanding the market by analyzing charts with some other analysis tools.
Charting strategies are one of the varieties of classical technical analysis that was used back in the 20th century. These strategies are based on classic patterns such as: head and shoulders, double-triple top / bottom, wedge, triangle. The main tool of graphical analysis is the support / resistance lines that the trader draws on the chart. Since everyone has a different vision of the market, each trader sees the market differently. For example, if we take 5 traders, and give them the task to do a graphical analysis of one currency pair. What do you think will happen?
What happens is that all five traders will have different patterns. One will have triangles, the other will have a head and shoulders with tops and troughs, and the third will have rectangles. Which one do you think is wrong? Answer: Everyone is right in their own way and everyone has the same chance of making a profit.
The fourth group of systemic trading strategies is channel strategies. The word “channel” itself tells us that the price of the instrument is stuck in the corridor, which is formed on the basis of psychological levels. The flat system implies trading from one level to another. This strategy is very popular in the forex market.
Wave strategies are strategies based on classic wave analysis. This type of trading was invented by a well-known economist / trader, Mr. Elliot. He created a theory that the behavior of the market depends on the psychology and nature of its participants. Wave strategies include a special cycle with zigzag-shaped directions and downturns, while all this has a certain pattern.
Hedging strategy - A system in which the focus is not on maximizing profits, but on protecting the funds already earned from various surprises.
And the last systemic trading strategy is a universal or, as it is also called, a combined strategy. Universal strategies include combinations of 2 or 3 trading strategies into a single one.
By trend they are subdivided into:
Trending strategies - A trend is the direction of the market, its style, its movement. You have probably heard such phrases as “The trend is your friend and never move against the trend”.
The essence of strategies that work with a trend is to correctly enter a trade at the moment the trend starts and in the middle of the trend; it is worth exiting at the moment of the trend extinction.
The market does not stand still, it moves constantly. To consistently make money in the market, you need to constantly develop and move forward.
The opposite of trend strategies are counter trend strategies. They are mainly used by highly qualified traders who know and understand the market.
Countertrend strategies are strategies that work against the trend.
As a rule, to make a deal against the trend, traders will impulse movement, which will then give a pullback, on which counter-trend strategies specialize. With the correct definition of this moment, bidders can earn double profits. The first part is to earn on the trend, the second on the reversal and on the correction.
For successful trading, it is advisable for a trader to study all types of strategies, their advantages and disadvantages, and choose his own. Each strategy has its pros and cons, you just have to define your trading style and stick to it all the time. To get the most out of your trading strategies, you need to build an entire system.
Let's take a closer look at what a trading strategy long term is.
Long term trading strategies
Today in the markets there is an opportunity to use strategies that differ in terms of time criteria. Some traders only use short-term strategies in trading, while others buy stocks and sell them only after a few years.
However, many traders choose something in between. Every market swing is monitored, but only long-term time frames are used.
In other words, long-term trading can be called positional. Many traders, choosing this type of trading, consider it very simple. They open an order, place an order to take profit and an order to limit losses, expecting to get several hundred profits. After a few days or months, the trader checks his trades. Thus, for a sufficiently long time, you can get a fairly large profit or a small amount of losses, depending on how the order for the amount of a fixed profit (take profit) or for limiting losses (stop loss) is triggered. At the same time, there is an opportunity to take away the already existing profit at any time.
In fact, positional trading is recommended for fairly experienced traders. Before opening a position, it is necessary to make a thorough analysis of the market situation for the long term. In fact, it is necessary to predict in advance how many points the price will rise or fall, and calculate the profit.
Professionals using a trading long term strategy sometimes just need to look at the daily or weekly chart to see and capture this price movement.
The undoubted advantage of positional trading is that it is quite difficult to instantly "drain" the deposit, with the rational use of your precious account. Using 1-3% of the size of the deposit for a transaction, a trader is able to easily secure it, and even the opposite direction of several thousand points will not be significant losses when using risk management. The movement will not be very sharp and there is always an opportunity to close the deal in time if the analysis is not confirmed.
Long-term trading is not recommended for beginners looking for instant profits and impatient traders. Positional trading allows you to spend less time trading and doing other things. But in order to constantly use only a long-term trading strategy, it is necessary to have a good understanding of the market and a sufficiently large amount of funds in circulation.
There are a very large number of long term trading strategies.
Your best long term trading strategy
To form your best strategy for long term trading, be sure to study the market, use technical analysis, and use orders.
What does technical analysis mean?
This type of analysis looks at the historical data of an asset and looks for patterns in past price movements. It also takes into account the volume of securities trading. Technical analysis can be used for any type of financial instrument (stocks, bonds, commodities), if there is historical data on the required asset.
Technical analysis is often used for short-term investments, because it does not take into account the future prospects of the company's potential, but is based only on the history of the asset. Technical analysis is useful for those who are calculating a daily strategy for intraday trading. Such an analysis is carried out using statistical methods and diagrams, with the help of which certain patterns can be determined.
What is technical analysis
Technical analysis is based on the following assumptions:
- All relevant information is already included in the prices;
- Supply and demand determine the market value;
- Past performance is an indicator for predicting future price movements;
- In the history of an asset, you can reveal hidden patterns and trends;
- Investor sentiment can be predicted;
- There are trends in market behavior;
- In the case of each specific asset, the behavior of investors may be repeated.
Types and indicators of technical analysis
There are many different types of technical analysis depending on its nature and properties. First of all, the analyst can use different types of charts such as histogram, line chart, or candlestick chart. Charts show price movement at different time intervals - one minute, five minutes, hour, day, week, month or year.
Apart from charts, the analysis uses various types of indicators. The trendline is used to find trends in past stock prices. The Fibonacci retracement is an indicator that can be used to find support and resistance levels. There are many other indicators available in technical analysis as well.
All of the above components of technical analysis are used in the development of an investment strategy. They can be useful for identifying patterns and recurring trends in the price of a stock or the price of other instruments.
Technical analysis and fundamental analysis
Unlike technical analysis, fundamental analysis is an in-depth analysis. It evaluates an investment decision based on the financial statements of a company, industry, competition, future prospects, and so on. It is more expensive to execute, but can help in the process of assessing the real value of a company or investment.
What is a take profit order?
Take profit order plays a key role in the strategies of many traders and is used with a variety of assets - from stocks and foreign currencies to cryptocurrencies. When prices start to rise, orders serve as an upper limit and ensure that assets are sold before prices start to fall again. Imagine that the poker player knows exactly when to leave the game table. Then, instead of continuing the game at the risk of losing his winnings, he ends the game and remains with the money. This is how take profit works.
The opposite of a take profit order is a stop loss limit, which is also called a stop limit. It starts selling stocks when prices hit a predetermined low point. This helps traders reduce losses and protect themselves if prices continue to fall.
How does an order work?
A trader usually chooses an activation price for their take profit order based on technical analysis. They rely on charts that show the performance of a stock or foreign exchange over the past day or week. Typically, these orders are used for short-term trades as they can significantly reduce profits when a trader has chosen a long-term strategy.
What is the use of take profit?
Take profit order helps to avoid emotions when trading. When opening a trade, you can safely choose the price at which you will be ready to exit, instead of succumbing to emotion and selling assets too soon or too late. They also eliminate the need for traders to manually sell their stocks and constantly monitor prices throughout the day.
Cons of the order
Although take profit guarantees a profit, it is possible that the order will be filled and prices will continue to rise. Accordingly, you may be missing out on more substantial profits. There is also the potential for human error, so always check that the settings are correct to avoid costly mistakes.
What is a stop loss order?
Stop loss orders allow traders to automatically put their stocks for sale if they fall below a certain price. They help prevent losses when the stock markets are in downturns and also eliminate emotions in trading.
Stop loss order value: pros and cons
Stop loss orders allow investors to think ahead of time about the price at which they want to sell their shares, preventing rash and potentially unprofitable decisions. Such an order also relieves shareholders of the need to constantly monitor changes in the market. Selling actions will occur automatically if prices fall to a preset level.
And also, one cannot fail to mention this way of investing - this is CFD.
How to invest without buying?
It is possible to profitably invest in India through CFDs.
What are CFDs?
CFD is an abbreviation for the English term Contract for Difference; they are simple, inexpensive contracts that allow you to trade a wide range of financial instruments, speculating on the difference in the value of the underlying trading instrument or security. A CFD deal lasts from the moment of its conclusion until the moment it is closed.
CFDs on shares
CFDs on shares are a simple and convenient way to invest in the securities market in either of two directions. They reflect the prices of the official market and allow the investor to trade in the securities market using leverage.
In addition, CFDs allow a long position trader to receive dividends (if any) from the securities to which the CFD is associated.
How to get started with your strategy long term trading?
Register on the online platform
It only takes a few minutes to create an account on the platform. For your convenience, brokerage companies have made it easy to sign up on the platform down to entering minimal details such as your username and email address.
Practice on a demo account before you start applying the best long term trading strategies. Learn to use analysis, tools and orders. Using a demo account, you do not risk anything, since the money on it is virtual.
To start working on a demo account, just press one button.
It is very easy to make a real money deposit on the platform. Money is credited instantly. Each platform sets its own minimum deposit threshold. This is usually a few dollars. There are many deposit options that you will find in the terminal. You just have to choose a convenient option. The most common are bank cards, bank transfers, or e-wallets.
Use a simple long term trading strategy to get started. We wish you good luck! Try it and you will succeed!