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Trading Strategies

Navigating the world of trading strategies can be overwhelming due to their sheer abundance. Attempting to grasp all of them at once can leave your head spinning. However, the key to successful trading often lies in simplicity. Utilizing two or three proven methods can provide a consistent profit without the need for excessive time commitment. Online trading, in particular, streamlines this process, enhancing simplicity and clarity.

In this article, we'll explore straightforward strategies essential for beginners and delve into more complex, higher-risk methods that offer the potential for significant profits. This approach not only allows you to engage in trading without drowning in information but also sets the stage for you to develop your own successful strategy.

All trading strategies are based on different signals depending on the chosen analysis methods. Let's explore three basic directions of the technical analysis:

  • Candlestick analysis
  • Working with strength levels
  • Computer analysis

Candlestick analysis

This analysis method delves into studying patterns in candlestick charts, where each pattern serves as a signal for either a tendency reversal or continuation. Rather than attempting to absorb the overwhelming amount of information available online, it's more beneficial to concentrate on the frequently encountered and widely acknowledged candlestick patterns. Initially, let's explore the signals indicating a potential reversal. 

Engulfing candlestick strategy

This pattern serves as a reversal signal, specifically triggered by an engulfing candlestick. The signal occurs when the current candlestick has a larger body than the preceding one but moves in the opposite direction, effectively engulfing it. When you identify this signal, it's essential to be alert and assess the direction of the subsequent candlestick. If the following candlestick also engulfs its predecessor, it presents a trading opportunity.

Squat candlestick strategy

Squat candlesticks frequently indicate a potential trend reversal. Typically, these candlesticks suggest market uncertainty in the current direction, and they tend to emerge at significant price levels. Whether it's a single candlestick or a cluster of them, when you encounter a candlestick with a small body and a long shadow, it's a signal to brace yourself for a potential reversal in the current trend.

Tweezers candlestick strategy

Another potent reversal signal in trading is the tweezers candlestick pattern. Tweezers are characterized by two candlesticks with different directions but sharing identical highs or lows. In a downtrend, tweezers candlesticks will exhibit the same lows, while in an uptrend, they will showcase the same highs. These highs and lows can pertain to both the closing prices and the shadows of the candlesticks. The appearance of tweezers candlesticks may involve consecutive occurrences or include one or more candlesticks between them. This signal holds sufficient strength and clarity, making it a robust indicator on its own or when combined with other candlestick patterns.

Three methods strategy

A continuation signal in a trend pause can be identified through three methods. Visually, on a chart, it manifests as a series of small candlesticks following a long one. The distinctive characteristic of this pattern is that the new small candlesticks fall within the size range of the preceding candlestick. This pattern may comprise three or more candlesticks. The signal for continuation occurs when a sizable candlestick in the direction of the trend concludes the pattern. To act on this signal, you should initiate a trade after the closure of this particular candlestick.

As you can see, candlestick analysis proves to be highly effective, offering a valuable tool for identifying trading signals.

Working with strength levels

Strength levels are indicative of points on a price chart where a halt or reversal may occur. Incorporating these levels into trading analysis simplifies a trader's decision-making process. We'll initiate our discussion by exploring support and resistance levels.

Support and resistance levels provide insights into historical price levels, local minimums, and maximums, as well as trend and channel lines on the price chart. When the price reaches these levels, it suggests a potential halt or reversal. Two primary trading strategies emerge from this analysis: breakout and reversal strategies.

Breakout strategy

In line with this strategy, you initiate trades when the price chart breaks through a current level and sustains its movement in that direction. Specifically, a trade is triggered when the body of a candlestick breaks past a support or resistance level, and the subsequent candlestick follows suit by moving in the same direction.

Reversal strategy

A main aspect of this strategy is that we open a deal after the price chart has reversed. If a candlestick has reached the level and failed to be closed outside it we should start trading. A candlestick can touch the level with its shade or body. If a candlestick is closed inside a strength level and its shade touches it the price will not be able to pass it. A signal confirmation will be a new candlestick in a reversal direction.

As you see breakouts and reversals at the support or resistance levels give good signals for trading. These signals can be strengthened or weakened by signals of the candlestick analysis and together they give us more chances to open a successful deal.

Computer analysis

In computer analysis, we use indicators to find an entry point. Here are the three most popular indicators:

  • Moving averages
  • Bollinger bands
  • Alligator

Moving averages strategy

Let's delve into the signals provided by moving averages in trading. There are two primary types: tendency reversal and tendency continuation. In a reversal, the price chart crosses the moving average line, signaling a shift in trend direction. On the other hand, in a continuation signal, the price bounces off the moving average, with the indicator typically serving as support or resistance levels based on the position in the price chart.

To obtain these signals, install the moving average indicator for an extended period. It's crucial to note that selecting an individual period for each tool is essential for accurate signal interpretation.

Bollinger band strategy

The Bollinger bands are easy to use and can replace the trend channels as the indicator shows the most often range of price movement. To work with the Bollinger bands you can use the signals when the price breaks out the bands — after a sharp breakout of the usual price range the price tends to go back to a central band.

 Alligator strategy

Another valuable indicator is the Alligator, which proves helpful in identifying the commencement of a trend movement. Although it doesn't function as a primary indicator offering trading signals, its lines can be utilized as support and resistance levels. Indicators, in general, play a crucial role in trading by facilitating analysis and quick decision-making. They serve as an advantage since a computer handles all calculations, providing ready-made trading signals. The only drawback lies in the need to configure each indicator for every trading tool individually.

News trading

We're familiar with how the market frequently responds to news releases, and a powerful piece of news often triggers significant price movements. While the news trading strategy carries inherent risks, it also presents an opportunity to secure substantial profits within a matter of minutes. However, it's crucial to recognize that trading the news can result in the loss of assets during these brief moments.

In the world of online trading, the process is simplified and less risky. In online trading, our risks are confined to the amount of the deal, and this simplicity is advantageous when our forecasts don't materialize. Moreover, in addition to having fixed losses, we also enjoy fixed profits in online trading.

Money management

This is important for traders aspiring to achieve consistent profitability. The optimal money management strategy involves vigilant monitoring of losses. Start by establishing a predetermined threshold for losses — a level at which you must pause and assess the efficacy of your existing trading strategy.

Conclusion

We've covered just the fundamental strategies out of the myriad available for trading. By thoroughly studying and practicing these strategies, you can establish a strong foundation for your future successful trading approach. Select two or three analytical tools, and you're ready to start earning. Our website offers comprehensive information, explanations, and comments on various trading methods, providing you with the resources to gain experience and succeed in your trading endeavors. Start your journey to success with us!

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