6 Trading strategies that are guaranteed to work
A trading strategy is a plan that determines exactly when and how to trade, and then executes automatically.
It sounds easy but many pitfalls can lead to disaster. Without the right strategy in place, you will simply be reacting to what’s going on in the market with your emotions running wild – not a recipe for success
Successful traders have spent years developing their strategies. Like building a house you need strong foundations with lots of supporting walls, without them, everything will crumble
In this article, we take a look at 6 trading strategies that are guaranteed to work if followed correctly
Automated trend following Strategy
This strategy employs no less than three indicators including price action which means it is a slow maturing strategy, where the first signal may take a while to emerge.
It is however very powerful if you have patience and can sit on your hands until it gives a clear buy/sell signal. The three indicators are
Exhaustive trend following strategies
This strategy uses price action as one of its components, but rather than relying solely on that as an indicator it also includes two technical indicators including momentum and stochastic, which makes for a more balanced approach.
By definition all exhaustive types of trading strategies will be slow-moving as they look at numerous macro-signals to determine when to enter and exit trades; it’s like having many eyes looking over the market and seeing things, not visible to the naked eye.
The drawback is that, although it will give you more signals, they will be slower to act on which require patience
Swing trading strategies
This strategy uses price action as its main component and employs an indicator called RSI (Relative Strength Index).
It is a strategy that requires you to hold your positions for 15-45 minutes or even longer if necessary.
You pay attention initially to price movement and once the swing has started then you look at the RSI indicator. If it’s oversold (i.e. below 30) then there’s potential for a bounce; if not then wait until it gets near the overbought threshold (above 70), but rather than entering straight away you wait for the candle to close and then check.
If it’s green then you can go long, if red then you stay away from it as there is a potential reversal coming up.
The strategy will give you a lot of signals but they won’t be as fast-acting as the exhaustive approach
This strategy uses price action and employs two technical indicators momentum and RSI to gain both entry and exit signals.
It is a very fast maturing strategy that can yield big profits, but it requires a lot of concentration, a good feel for the market and a volatile trading instrument to work with.
Even if you are successful at scalping there’s no guarantee that it will last longer, especially if the currency pair does not have enough liquidity (i.e. not many trades on each time frame).
Traders that succeed here tend to come from the day-trading community rather than
Price action only strategy
This strategy requires no indicators whatsoever because everything is determined by price action alone.
You analyse what the market has done before entering into a trade and also how it reacted to key levels of support/resistance on its way down or up respectively.
It sounds risky but works very well if you combine it with price action confirmation from other charts such as 15-minute or even hourlies which gives you extra assurance that your original entry signal was correct
Fibonacci retracement trading strategies
Just like the price action only strategy, this strategy requires no indicators at all. You look for key fib levels to be tested and respected on the way up or down respectively.
If they are broken then there’s a likely reversal coming up soon, which you can use to your advantage.
Note that it doesn’t tell you exactly when the reversal will happen just that it is likely to happen sometime soon based on historical data gathered over years of trading
These strategies listed above require various amounts of commitment and patience varying from fast-acting scalping strategies with high reward but low chance of success; through slow-moving exhaustive methods with higher potential gain; right up to pure price action approaches which rely solely on what the market has done in the past.
What works for one person will not necessarily work for another, so you need to find your winning strategy that suits your personality and style.