Take a look at these five chart-based trading strategies and how they can help you perform better.
Traders use charts to easily monitor their positions in real time in the markets. Trading charts are tools that help in decision making. For beginners, however, charts can seem complicated. If you have trouble understanding graphs, take a look at these five simple strategies, including day trading or positional trading.
This strategy is based on the use of Japanese candlestick charts which allow you to observe market prices over time. They offer the advantage of enabling you to zoom in and out and display the precise situation of the value of a financial instrument over a unit of time, such as minutes, hours, days, months or years. When it comes to day trading, the unit of time considered is ten minutes or one hour. Positions are closed in just a few hours.
The day trading strategy consists of not leaving any position open during the night. To do this, traders open positions after 9am, after the opening of the Paris Stock Exchange, and close them at 5:30pm.
In case of economic events that occur after 5:30 pm, the day trader's investments will not be affected by any resulting market fluctuations.
However, day trading requires daily closing of accounts, even if significant losses have been incurred during the day.
Also using Japanese candlestick charts, swing trading differs from day trading in that positions are kept open overnight. Moreover, the opening of the position can be extended up to 5 days or even a few weeks. This strategy allows you to aim for better returns than the previous strategy. However, the risk of loss is also multiplied by this extension of the opening time of the positions.
By opting for swing trading, you have to accept the idea of suffering possible losses during the night. This can lead to stress and even insomnia. To use this strategy properly, it is necessary to consider the daily fluctuations in prices. The unit of time is one day. This gives you more freedom, as you don't have to sit in front of your screen and watch the markets move on smaller time units.
This trading strategy is aimed at repeatedly making small gains. It considers small price changes to reduce risk. To achieve this, positions are opened and closed in very short periods of time, which can last less than 5 minutes. Based on the analysis of Japanese bar charts, scalp trading requires zooming in on curves using the minute as the unit of time.
However, this technique usually requires investing large amounts of money if large profits are to be made. However, since the risk of loss is very low, the accumulation of small gains can generate large capital gains in a short period of time.
This strategy consists of keeping a stock position open for a few weeks or even months. The trader buys and holds the acquired assets for a long period of time before reselling them. Mastering this technique requires the use of several charts at the same time. Analysis must be undertaken on the basis of daily, weekly and monthly fluctuations in order to make decisions. Positional trading then consists of investing small initial amounts on various assets and then gradually increasing the number of trades.
This strategy avoids considering short-term fluctuations, allowing you to target the largest trades and usually results in only small losses.
To use the algorithmic strategy, traders use computer programs. These programs automatically make entries and exits in the markets according to the parameters set by the trader. In particular, the trader must program a set of conditions and rules that are necessary for the software to work.
This strategy is mainly used to exploit micro-fluctuations in prices with high investment frequency. This allows the trader to enjoy complete freedom, as he no longer needs to intervene directly in the markets. All that is required is for the computer program to be connected to it. However, the success of this strategy is based above all on the analytical and forecasting skills of the trader who has been able to set up their automatic investment software according to their needs.