There are countless ways to profit off of trading stocks & crypto as a trader. Trading strategies help you organize those techniques into a coherent framework that you can follow. This way, you can continually monitor and optimize your stock & cryptocurrency strategy.
The three main schools of thought you’ll need to consider when building a trading strategy is technical analysis (TA), fundamental analysis (FA) and EngineeringRobo. With a solid trading strategy that you will get from EngineeringRobo , you’re more likely to achieve your trading and investment goals.
Since there are many different trading strategies, we’ll cover some of the most common ones. This article mainly focuses on stock & cryptocurrency trading strategies. However, these may also apply to other financial assets, such as forex, options, or precious metals like gold.
So, would you like to devise your own trading strategy? This article will help you with the basics of how you should approach speculating on the crypto markets. With a solid trading strategy, you’re more likely to achieve your trading and investment goals.
What is a trading strategy?
We can describe a trading strategy as an extensive plan for all your trading activities. It’s a framework you create to guide you in all your trading endeavors.
A trading plan can also help mitigate financial risk, as it eliminates a lot of unnecessary decisions. While having a trading strategy is not mandatory for trading, it can be life-saving at times. If something unexpected happens in the market (and it will), your trading plan should define how you react – and not your emotions. In other words, having a trading plan in place makes you prepared for the possible outcomes. It prevents you from making hasty, impulsive decisions that often lead to big financial losses.
For instance, a comprehensive trading strategy may include the following:
🔵 What asset classes you trade ( Cryptocurrencies , Stock or Commodities )
🔵 How much time you spend a day on trading ( 30 minutes, 4 hour or 10 hours )
🔵 How much money you start trading ( $1000 , $10,000 or $100,000 )
🔵 What tools and indicators you use ( Moving Average , Bollinger Bands or EngineeringRobo )
🔵 What triggers your entries and exits (Trendlines, Support & Resistance Levels or EngineeringRobo's signals)
🔵 What dictates your position sizing ( 1%, 2% or 5% )
🔵 How you measure your portfolio performance ( Weekly, Monthly or Yearly )
🔵 What is your risk tolerance? ( Low, Medium or High )
There are four main types of trading strategies: Scalping, Day, Swing and Position, and most successful traders tend to identify and stick to a single approach rather than mixing them up. However, there is also a fair amount of crossover between the four, at least when it comes to using technical indicators or relying on fundamentals. Also, if you are new to trading it is important to look at what is involved in each approach to see how it suits you and your lifestyle!
Scalping is one of the quickest trading strategies out there. Scalpers don’t try to take advantage of big moves or drawn-out trends. It’s a strategy that focuses on exploiting small moves over and over again. For example, profiting off of bid-ask spreads, gaps in liquidity, or other inefficiencies in the market.
Scalpers don’t aim to hold their positions for a long time. It’s quite common to see scalp traders opening and closing positions in a matter of minutes. This is why scalping is often related to High-Frequency Trading (HFT).
Scalping can be an especially lucrative strategy if a trader finds a market inefficiency that happens over and over again, and that they can exploit. Each time it happens, they can make small profits that add up over time. Scalping is generally ideal for markets with higher liquidity, where getting in and out positions is relatively smooth and predictable.
Scalping is an advanced trading strategy that isn’t recommended for beginner traders due to its complexity. It also requires a deep understanding of the mechanics of the markets. Other than that, scalping is generally more suitable for large traders (whales). The percentage profit targets tend to be smaller, so trading larger positions makes more sense.
Day trading might be the most well-known active trading strategy. It’s a common misconception to think that all active traders are by definition day traders, but that isn’t true. Day trading is a full time job.
Day trading involves entering and exiting positions on the same day, and no position is held overnight. As such, day traders aim to capitalize on intraday price movements, i.e., price moves that happen within one trading day.
The term “day trading” stems from the traditional markets, where trading is open only during specific hours of the day. So, in those markets, day traders never stay in positions overnight, when trading is halted.
Most digital currency trading platforms are open 24 hours a day, 365 days a year. So, day trading is used in a slightly different context when it comes to the crypto markets. It typically refers to a short-term trading style, where traders enter and exit positions in a timespan of 24 hours or less.
Day traders will typically use price action and technical analysis to formulate trade ideas. Besides, they may employ many other techniques such as EngineeringRobo to find opportunities in the market.
Day traders typically spend more than 6 hours each day to watch trade setups and short term price movements. They use advanced charting systems which are plotted by 45 or 180 minute intervals.
Swing trading relates to a style of trading which uses technical analysis as its basis. Unlike day trading, swing traders are happy to run their positions overnight, and can hold for weeks if that is what their preferred technical indicators are telling them to do. In this way, they hope to capture bigger moves than those expected by day traders and this also means that they are generally prepared to take a larger risk in the hope of capturing a bigger percentage return.
Swing traders generally try to take advantage of waves of volatility that take several days or weeks to play out. Swing traders may use a combination of technical and fundamental factors to formulate their trade ideas. Naturally, fundamental changes may take a longer time to play out, and this is where fundamental analysis comes into play. Even so, chart patterns and technical indicators can also play a major part in a swing trading strategy.
Swing trading might be the most convenient active trading strategy for beginners. A significant benefit of swing trading over day trading is that swing trades take longer to play out. Still, they’re short enough so that it’s not too hard to keep track of the trade.
Capturing the “swing” of the market is the main motive here, so traders usually:
⚫️ Buy support and sell resistance
⚫️ Trade the bounce of the moving average
⚫️ Trade break-outs and pull-outs
⚫️ Watch closely EngineeringRobo's signals
The swing trader can set stop losses. While there is a risk of a stop being executed at an unfavorable price, it beats the constant monitoring of all open positions that are a feature of day trading. They should always exit position after the candle confirmation.
Since swing trading is seldom a full-time job, there is much less chance of burnout due to stress. Swing traders usually have a regular job or another source of income from which they can offset or mitigate trading losses.
Swing traders typically spend between 30 minutes and 2 hours each day to watch trade setups and mid-term price movements. They use charting systems which are plotted by 3H, 1D and 1W intervals.
Sometimes also referred to as trend trading, position trading is a strategy that involves holding positions for a longer period of time, typically at least a few months. As the name would suggest, position traders try to take advantage of directional trends. Position traders may enter a long position in an uptrend and a short position in a downtrend.
Position traders are concerned with long-term outcomes. Daily price movements and short-term market corrections, which can reverse price trends, do not affect trading decisions. Such traders allow their positions to fluctuate in-sync with the general market trends over the short term.
Position traders strongly rely on fundamental analysis, to map the outcomes over a long-term future. They follow long-term historical price trends to evaluate which assets would give them the preferred financial outcome. They also use technical analysis tools and EngineeringRobo to find the right entry and exit points. In addition to that, technical tools allow them to identify long-lasting trends and potential points of reversals.
A Position Trader has to be patient enough to sit back and wait for a trade to play out. They must have the discipline to cope with a position that turns against them (in the short-term) bearing in mind the reasons for entering the trade in the first place. However, the Position Trader must also be ready to acknowledge when a trade has gone wrong, typically when there is a change in the fundamentals underlying the original decision to take the position.
Position traders typically spend between 30 minutes and 2 hours per week to watch trade setups and long term price movements. They use charting systems which are plotted by 3 day and 1 week intervals.
Which is Better?
It is a good idea to first decide on whether you prefer short or long-term goals before choosing a trading strategy. For instance, if you are looking to build towards your retirement years, you might favour position trading, since it gives you sufficient time to achieve your investment goals, without needing to take on riskier short-term positions.
For professional traders, swing trading is more viable than position trading, since the latter offers fewer chances of gains. The market condition has to be studied as well. If the market is showing a full-blown bullish trend, taking on a long-term position could be risky. The bullish trend will end at some point, and the market corrections could eat away into the profits made when the asset was purchased.
To find out what is really working and what is not, you should follow and track each trading strategy – without breaking the rules you set. It’s also helpful to create a trading journal or sheet so you can analyze each strategy’s performance.
But it’s worth noting that you don’t have to follow the same strategies forever. With enough data and trading records, you should be able to adjust and adapt your methods. In other words, your trading strategies should be constantly evolving as you gain trading experience.
Last but not least, you should also customize your EngineeringRobo depending on your trading strategy.