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Know the basics of trading strategies

There are four typical time frames in which strategies can be developed: Intraday, position, trend and swing. Any investor is usually better suited to a particular time frame, but should not necessarily be limited to that.

Scalping

Scalping is a type of trading strategy designed to take advantage of small price changesas the benefits of these surgeries are gained quickly and once an operation has become profitable.

All forms of trading require discipline, but because the number of trades is so large and the profits from each trade are so smallA scalper must strictly adhere to your trading system to avoid large losses that could eliminate dozens of successful trades.

Know the basics of trading strategies
Know the basics of trading strategies

Scalers take small winnings to use the winnings as they appear. The goal is a successful trading strategy through a large number of profitable trades instead of a few successful high profit trades.

Scalping starts from the idea of ​​better exposure risk, as the current time of any surgery is quite short, which reduces the risk of an adverse event that causes a great deal of movement. It also assumes that smaller movements are easier to achieve than larger ones and that smaller movements are more frequent than larger ones.

Intraday

The intraday are those temporalities that relate to the analysis or operation or the duration of movements that only occur during the trading session (or trading session) and are opened and closed on the day. You don’t go from one session to the next.

Obviously the most basic would be a minute, the smallest. Then we have five minutes as the next most frequent, then we go to 15 minutes and from here on. We have now moved to the one-hour chart.

The hour-long chart is a bit between the two types, between the intraday and swing types. While it is true that when cataloging between one type and another we can fall into the mistake of thinking that they are absolute. Not much less. What here I am only showing the most common.

Algorithmic

Algorithmic trading, Trading in which orders are automatically executed using already programmed trading algorithms is also referred to as “algo trading” or “black box trading”.

In the instructions of these algorithms They indicate when to buy and when to sell and can include graphical analysis, volatility analysis, price arbitrage analysis, or just a simple trend based on price movements.

Investment banks and large hedge funds spend millions annually on trading teams who specialize in building black box trading models to gain market advantage. It generally consists of teams of mathematicians and engineers. Nbsp;

One of the biggest attractions to black box trading models is the fact that they eliminate human error. Dealing with emotions like fear or greed is the biggest stumbling block for all traders, a problem that algorithmic trading strategies simply don’t have.

A great attraction for traders

Many traders are also drawn to the fact that an algorithmic trading strategy can be sustained 24 hours a day. This is just one of the reasons they are used not only by independent traders but also by hedge funds, investment banks, and large mutual funds. Nbsp;

While most transactions in financial markets are now conducted using an algorithmic trading model, concerns remain.

Volatility during the May 6, 2010 flash crash in which the Dow Jones stock index crashed more than 600 points, although it later recovered in just a few minutes, it was largely attributed to algorithmic and high-frequency trading strategies.

One of the most popular algorithmic trading software available to retailers is MetaTrader 4, which you can download from several vendors who offer it for free for experimentation and running examples.

Algorithmic trading strategies

There are a variety of algorithmic trading strategies and new and advanced strategies are constantly being developed. However, the core strategies of these algorithms can be divided into the following categories:

  • Realignment of the indices
  • High frequency arbitrage trading
  • Average reverse trade
  • Machine learning and artificial intelligence strategies
  • Using momentum trading strategies that follow the trend

It is beyond the scope of this article to discuss the characteristics of each of these strategies. However, it is an open topic for future publications where these aspects can be covered in more detail.

Seasonal

Seasonal trading, or seasonal trading, is a strategy that examines the inconsistencies of market seasonality in order to identify price fluctuations in some time periods when profits can be made. These periods of time can occur in cycles that last a few years, a few months of the year, days of the week, or even hours of the day.

Although these patterns are easy to find, trade by buying one month and selling another. alone, This is not a good strategy for most financial instruments, and it is often necessary to study these timing patterns carefully to determine which are best for trading.

Part of this study is based on understanding the reasons why these patterns occur. This can lead to better options being found and better served.

Seasonal patterns are found in virtually any financial asset as changes in usage patterns, weather, temperature, and many other factors are ultimately reflected in price in some way. Nbsp;

To understand why these movements occur during these times. You need to have a deep understanding of the markets and, as a trader, you can study and understand a market thoroughly in order to develop a strategy based on the season of a particular market.

Related: Xcapit launches new trading algorithm profile

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