The stock market is rising and falling every single day. Therefore, it is essential to develop a good trading strategy if you want to become a successful trader. You won’t win in all the investment trades you make but that is all right.
As long as you are willing to learn from your mistake, you are on your way to become a successful investor. The following are some of the most popular stock market trading strategies.
Breakout Strategy
In breakout strategy, you must first determine a price level at which you will buy the stocks. The trader will purchase the stock when the price breaks beyond the price level. When the price breaks below the level, it will be time to sell the stocks. The concept is that the price will continue the move in the same direction. The best time to trade breakout stocks is when the market is trending. If the market is not trending, you may suffer losses as there is no momentum for the market to continue the move. The price will drop when it hits the level, which will cause you to lose money.
Fibonacci Retracement
Fibonacci retracement works along with fundamental analysis. This strategy works best when the stock market is affected by the economic events. If the stock market is not affected by any fundamental reason, it will be no use to apply the Fibonacci retracement technique.
It will cause losses to traders who want to trade in the original direction of the stock market.
Reversal
Reversal is a trading strategy used during a period when there are very few fundamental activities. Due to the lack of fundamental activities, the market will move without any clear direction. In this situation, traders can locate a key price level which they expect the price to bounce when it hits the level. The tools used in carrying out the reversal strategy are similar to the tools used in fibonacci retracement. If you plan to trade reversal stocks, make sure there will be no major news in that session.
Momentum Trading
In momentum trading, the trader usually take a short or long term position in hope that the momentum of the price will continue in the same direction. Momentum trading relies on short term price movement. Momentum traders will look for stocks that have high volume movements in one direction. The length of time the traders hold the position depend on how fast the movement of the stock is. This type of trading technique is not suitable for novices. Momentum trading does not require you to read financial statement or review the charts.
Trend Trading
Trend trading is often confused with momentum trading. In trend trading, the trader takes a long position when the stock is having an upward trend. On the contrary, the trader will take a short position when the stock is having a down trend. Trend trading assumes that the stock will continue in the same direction in the future. It is suitable for trades with all kinds of time frames including short, intermediate and long term trades. Sometimes, reversal can happen at different points of the time frame.
Conclusion
It will take some time before you can master binary options trading. If you are afraid of making an investment mistake, you can hire a financial advisor. The financial advisor can help you to monitor your portfolio by making proper adjustments depending on the condition in the market. By working with a financial advisor, you can advice making emotional decision in the stock investment when the m market has high volatility.