What is a trading strategy?

A trading strategy is a number of rules that traders use to trade and manage their capital. The key aim of any strategy is to get an income.

Why do traders need a strategy?

A trading strategy is a clear plan of actions in the market. It allows traders to systemize their approach to trading and make it more profitable.

Following a particular strategy will help you minimize the influence of your emotions, which often leads to significant losses.

What is more, a trading strategy helps traders to save their time. If you have a trading algorithm, you can take a decision faster and easier.

What does a trading strategy include?

Any trading strategy consists of several important aspects:

A trading strategy may also involve trading on a particular time frame or even at particular hours.

What are the types of trading strategies?

Nowadays, there are more than 20 million trading strategies. At first sight, all the strategies are different. In fact, they have similar features. All the strategies are classified by four main parameters:

1) Duration of keeping a position open

Depending on how long a position is open, there are the following types of strategies:

• - Ultra short-term
• - Short-term
• - Mid-term
• - Long-term

2) The level of risk

In this case, everything depends on what risk a trader is ready to take. There are three types of strategies in this category:

• - Conservative (the lowest risk);
• - Aggressive (a higher risk);
• - Moderate (a balanced risk).

3) Market analysis method

Every trading strategy is based on market analysis. Depending on the method of analysis and forecasting of the price movement, there are three types of strategies:

• - Trend
• - Countertrend
• - Flat

4) The way of entering the market

Since the trading could be performed by a trader or a robot, there are three types of strategies:

• - Manual
• - Semimanual
• - Automated