7 Trading Strategies Every Trader Should Know

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When trading the financial markets, there are a number of well-known trading strategies to use. Success with one strategy may not necessarily translate to success with another.

Which trading strategy works best for you is ultimately a personal decision. Your personality type, way of life, and the resources at your disposal are some crucial considerations.

In this article, we will give an overview of some popular trading strategies that will serve as a starting point for you to develop your own trading strategy, try out some new trading tactics, or refine your current approach.

What are the 7 most Effective Trading Strategies

1. Day Trading Strategy

For traders who want to trade constantly throughout the day, often as a full-time job, day trading or intraday trading is the way to go. The day trader capitalises on price changes that occur between the market's opening and closing times. Day traders reduce their exposure to overnight market volatility by closing any open positions at the end of the trading day. It is advised that day traders adhere to a well-structured trading strategy that can promptly adjust to rapid market fluctuations.

Pros and Cons of Day Trading


There is no overnight risk

Limited intra-day risk

Time flexible trading

Multiple trade opportunities


It requires discipline

Flat trades when positions do not move with the day

2. News Trading Strategy

Trading strategies that involve making decisions based on news and market expectations, both before and after news releases, can be quite effective. Trading on news announcements demands a sharp mind-set, given the rapid dissemination of information on digital platforms. Traders must quickly evaluate the news upon its release and determine how to approach trading. Having a clear grasp of these variations in market expectations is essential for achieving success with a news trading strategy.

Understanding how financial markets work is critical when trading based on news releases. Markets rely on energy to generate movement, which is fuelled by the constant flow of information, including news releases. Thus, it is often the case that news has already been taken into account in determining the price of assets. This is a direct consequence of traders trying to anticipate the outcomes of upcoming news releases and, subsequently, the market's reaction. A news trading strategy can be highly beneficial in volatile markets, such as oil and other commodities that experience frequent fluctuations.

Pros and Cons of News Trading Strategy


A defined entry and exit strategy depending on how the market interprets the news

Many trade opportunities


Overnight risk

News trading requires expert skills

3. Swing Trading Strategy

Swing trading involves trading on both sides of the movements in any financial market. Swing traders strive to purchase a security when they anticipate a potential market upswing. Alternatively, they can "sell" an asset when they anticipate a decline in price.

Swing traders capitalise on the market's fluctuations, profiting from the price's movement between overbought and oversold conditions. Swing trading is a method that focuses solely on the technical aspects of market analysis. It entails studying charts and analyzing the individual movements that form a larger trend.

Understanding the length and duration of each swing is crucial for successful swing trading, as they determine significant support and resistance levels. In addition, swing traders must be able to recognize trends in which markets experience higher levels of supply or demand. Traders also analyse the momentum changes within each swing as they closely monitor their trades.

Pros and Cons of Swing Trading Strategy


It is viable as a hobby

Many trade opportunities


Overnight risks

Requires ample research

4. End-of-day Trading Strategy

Trading near the market close is an important component of the end-of-day trading strategy. End-of-day traders become active when it becomes evident that the price is about to ‘settle' or close.

This approach entails analyzing price action in relation to the previous day's price movements. End-of-day traders can analyze the price action and make informed decisions about potential price movements, taking into account the indicators used in their system.

Traders should consider implementing a comprehensive set of risk management orders, which can include a limit order, a stop-loss order, and a take-profit order. These orders can help to minimize any potential overnight risk.

This trading style offers a lower time commitment compared to other trading strategies. Studying charts solely during their opening and closing times is sufficient.

Pros and Cons of End-of-day Trading Strategy


End-of-day trading can be a good way to start trading, as there is no need to enter multiple positions

Less time commitment


Overnight positions can incur more risks, but this can be mitigated if you place a stop loss order

5. Trend Trading Strategy

This approach outlines a method where a trader uses technical analysis to identify a trend and exclusively engages in trades that align with the established trend.

Understanding market trends is distinct from having a biased perspective towards bullish or bearish positions. Trend traders do not hold a predetermined perspective on the market's future direction.

Achieving success in trend trading hinges on the ability to accurately identify and consistently follow market trends. It's important to remain vigilant and flexible, as trends can shift rapidly. Being mindful of market reversals is crucial for trend traders, as they can pose significant risks. However, one effective way to minimize these risks is to use a trailing stop-loss order.

There are various tools available for analysing different markets, such as equities, treasuries, currencies, and commodities. Patience is key for trend traders, as navigating and capitalizing on trends can be challenging.

However, with sufficient confidence in their trading system, the trend trader should be able to maintain discipline and adhere to their rules. However, it's just as crucial to be aware of when your system has ceased functioning. It's crucial to recognise when there's a significant shift in the market and take quick action to minimise losses and maximise gains in trend trading.

Pros and Cons of Trend Trading Strategy


Trend trading is suitable for people with limited time, after their trend identification system has been created

A prevailing trend may offer various opportunities to enter and exit a trade


Trend trades are often open over several days so they may incur more overnight risks than other strategies

6. Position Trading Strategy

Position trading is a widely used trading strategy in which traders hold onto their positions for extended periods, typically months or even years. This approach prioritises capitalising on long-term trends over succumbing to short-term price fluctuations. Position traders typically use fundamental analysis to assess potential market price trends. They also consider other factors, like market trends and historical patterns.

Pros and Cons of Position Trading Strategy


High profits as position trading allows traders to use high leverage

Less stress


Significant loss as position traders tend to ignore minor fluctuations

Swap commissions paid to the broker can accumulate a large amount

7. Scalping Trading Strategy

Traders who employ a scalping strategy execute trades with very short durations and minimal price fluctuations. Scalpers strive to generate a small profit from each trade, with the intention of accumulating these profits over time. For scalpers, having a disciplined exit strategy is crucial, as a significant loss can wipe out the steady profits accumulated over time. Forex scalping is a popular strategy for trading currency pairs.

Operating differently from the common mantra of "let your profits run," scalpers typically take their profits before the market has a chance to move. Similar to a quantitative analyst, scalpers typically aim for a risk/reward ratio of approximately 1/1. Rather than seeking substantial profits per trade, scalpers prioritise accumulating a greater number of smaller winning trades.

Pros and Cons of Scalping Trading Strategy


There is no overnight risk

Scalping is suitable for people who want to trade flexibly

Many trading opportunities


Limited market applicability

Requires discipline

It’s an extremely tense environment. It’s therefore not recommended for beginner traders

How to choose the best trading strategy?

When it comes to trading strategies, their performance can vary depending on market conditions. Determining the best trading strategy is a matter of personal preference. It is advisable to select a trading strategy that aligns with your personality, level of discipline, available capital, risk tolerance, and availability.

Choosing a trading strategy can be a straightforward process, and you have the flexibility to explore multiple options. It's crucial to keep in mind that top traders possess the ability to be flexible and adjust their trading strategy according to the available opportunities. It is advisable to gain knowledge about various trading strategies and develop the ability to adapt to different situations by combining different approaches to trading.

However, it's important to stay positive even if you experience some initial setbacks with your capital. Having a patient mind-set is crucial in the journey to becoming a successful trader. It's important to understand that making mistakes and experiencing losses are part of the process of honing your trading skills and achieving growth.
Experienced traders frequently monitor their gains and losses, which aids in upholding their consistency and discipline throughout all transactions.


To maximise your chances of making gains in the markets, it would be prudent to try out these strategies on a trading platform using a demo account. This will allow you to gain valuable insights into which strategies are most likely to yield profits for you. These trading strategies have the potential to form the foundation for developing your trading edge. Once you've discovered your advantage, you might consider upgrading to a fully funded account.

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