Trading Strategies

Trading Strategies

My trading strategies have evolved over the years starting off with a basic understanding of technical analysis, to learning about all the different technical indicators and oscillators, learning about chart patterns and candlesticks, plus a multitude of trading strategies and systems.

This evolution as a trader has come at a huge price, not only in terms of the amount of money spent on products, courses and seminars, but also as a result of blowing my trading account on several occasions.

One thing I have learnt is that trading success ultimately comes from within and not from any one particular strategy, system or tool. You have to master yourself, control your emotions and fears, before you can tame the market and consistently take a profit from it.

My current trading strategy is very simple and involves viewing charts with very basic tools and indicators – I use trendlines, support and resistance levels, moving averages, MACD on most charts, ocassionally throwing in Bollinger Bands, Fibonnacci retractments, RSI and Stochastics.

On a weekly basis I view long term candlestick charts (weekly and daily charts) to get a feel of where the market is, looking out for any significant chart patterns, and to mark out some of the key levels of support and resistance, and draw up trendlines indicating strong trends or channels.

During the week, I focus on the short-term charts, everything from hourly charts to 15 minute and 5 minute charts depending on how busy I am, going through the same process of marking the chart and identifying potential trades.

Some of the spread betting strategies are as follows:

  1. Trend following: This is the most common method adopted by traders to determine the position entries. This is done with the help of various types of charts. When charts shown an uptrend means prices show higher highs and higher lows (higher peaks and troughs) this can be considered to be a clear indication of a “buy” position. On the other hand, if there is a downtrend means lower highs and lower lows, it can be considered to a “sell” position. Trend following is generally done on longer time frames on the basis of assumption that the trend is likely to continue in the same direction for long period of time.
  2. Reversal Trading: Reversal trading also known as contrarian trading is another most popular strategy adopted by many of the traders. It is opposite of trend following. Here traders look for prospective areas where trends are overextended and ready to reverse. These trends can be either up trends or downtrends. When an uptrend is about to complete to the upside means ready to turn low, traders enter into “sell” position and when a downtrend is about to complete means moving upwards, traders enter into “buy” position. Although in this stratagem it is difficult to predict the trends but it is frequently used method by traders as it leads to more favourable entry points and thereby leading to more profits to the traders.
  3. Scalping: It is a spread betting strategy where the traders usually make profit on small price movements in a short period of time. The trader trades on current bid/offer price and as soon as the price moves in a positive direction the trader closes his position thereby earning profit.
  4. Simple moving average strategy: when two moving averages crosses each other a buy or sell signal is given on the basis of which the trader places a buy or sell trade. This is an important trading strategy.
  5. Range trading: According to this strategy, range is identified that is support and resistance levels which is of great significance in the market. When prices are heading towards support level the traders enter into long position and when prices are approaching towards resistance level the traders go for short position. The advantage of this method is, it allows the trader to place a stop loss which is placed outside of the trading range thereby preventing the trader from making heavy losses.
  6. Breakout trading: In this type of strategy, support and resistance levels are identified with new highs and lows. As soon as the price breaks the resistance level, it is an indication for the trader that an uptrend is in place and the prices will continue to rise. Thus the trader enters into buy position. Conversely, when the prices breaks the support level there is a downtrend and prices have the tendency to fall thereby leading to entering into sell position.
  7. News trading: This is usually done on the basis of interpretation of news and an in-depth knowledge of macro economic data.

These are some of the spread betting strategies which provides the spread betters to create an active market with different trading opportunities with an attempt to “buy high and sell low” translating into bigger gains.

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