Investment is an activity that is full of strategies. The right trading strategy is the key to obtaining optimal profits. Not only that, the right trading strategy is also able to reduce the risk to the lowest possible level. Strategy selection must be made based on several criteria, including market conditions and investors.
Day Trading to Scalping
Until now, there are various strategies that are often used by investors. Here we will try to describe a few trading strategy which is quite popular.
This type of trading strategy emphasizes transactions carried out on the same day. Both the opening and closing of transactions are carried out on the same day, without waiting for the change of day. This strategy is quite well known among professionals, including specialists.
The next trading strategy is position trading. This trading strategy is often referred to by some as active trading. In this technique, traders use charts for long-term purposes along with other tools to determine the future direction of the asset’s movement.
There are various ways in which this technique can make decisions. Usually this is done by ensuring that certain trends last for a long time, before investors decide their move. One of them is to make transactions at the price only if the same trend lasts a long time.
The third trading strategy is swing trading. This trading strategy is usually applied when the three position trading strategies are considered less profitable. When a certain price movement trend ends, usually price volatility is created which leads to the creation of a new trend. This is where traders using this strategy choose to make transactions. The transactions they carry out are usually based on prior market analysis using a combination of technical and fundamental analysis.
Such analysis is necessary to determine the best course of action in response to ongoing market conditions. Even though it looks profitable, this strategy itself has its own drawbacks, namely:
- Transactions cannot be ended on the same day as the opening.
- The analysis developed is less able to provide accurate predictions of the occurrence of a peak in an ongoing trend.
- This strategy is vulnerable to risk, especially if it is used in markets that experience sideways movements or futures trading.
Besides using the three strategies above, there are other trading strategies that are often used by investors in making transactions on the asset market. This strategy is known as scalping. When compared to the previous strategy, this strategy is quite fast.
The principle of this trading strategy lies in exploiting the price ranges created by the flow of orders and the distribution of demand and supply. This trading strategy works quite well when implemented in an optimal way using the spread. Alternatively, investors can also buy an asset at the exact bid price and sell it when it hits the bid price. This is where investors will benefit from the differences between the two.
On the other hand, this trading strategy rarely involves high volume transactions. This is inseparable from the small profits that are obtained. This is usually tricked by making transactions in markets with higher liquidity. In addition, asset markets that tend to be stable without much movement are often chosen because they are quite resistant to market shocks that occur. It is in these market conditions that their profits can be very well optimized.