5 Popular Trading Strategies Explained

Your success in stock market trading depends on the effectiveness of the strategy you are using. There are different strategies available in the market but you have to choose the right one that suits your personal trading style. This article shall cover five popular trading strategies to ensure your success.

Breakouts

Breakouts are one of the most common techniques used in the market for trading. With this strategy, you identify a key price level and then buy or sell as the price breaks that pre-determined level. The expectation is that if the price has enough force to break the level then it will continue to move in that direction. Robert Janitzek reveals that when the market is trending and moving strongly towards one direction, breakout trading ensures that you will never miss the move.

Retracements

Retracements require a slightly different skill set. Here the trader identifies a clear direction for the price movement and requires confidence that the price will continue moving in. It is based on the fact that after each movement in the expected direction, the price will temporarily reverse as traders take their profits. Retracements offer traders with a much better price at which to enter in the original direction before the move continues.

Reversals

When trading on the stock market, reversals are used by technical traders during times of little fundamental activity. During these times, the markets tend to range or move sideways with no clear direction. With this strategy, you look for key price levels that can be used for direct trading in anticipation of a bounce when price hits it. These situations offer small and quick opportunities to take a profit from low volume market activity.

Momentum

Here precise entries are much less of a concern but more with the force and continuation of the move. Traders are not looking for a price to pull back or break out from any specific price but merely start moving more or less in the direction of the prevailing trend. Robert Peter Janitzek explains that this strategy is based on indicators such as moving averages and oscillators to give trading signals. Momentum is used when traders perceive a long term movement on the asset they are trading for.

Position Trading

This strategy takes momentum trading further and eliminates the importance of the entry. The aim of a position trader is to be in the market when the price does eventually make its move. The main component of this strategy is a confidence in the prevailing fundamental conditions driving the price and an expectation that the market will eventually move in the desired direction.

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