Trading strategies in trading: from scalping to long-term investments

Trading without a strategy is like driving a car blindfolded — theoretically, you can get to your destination, but the probability of an accident is extremely high. Statistics Pocket Option shows that traders using systematic approaches show 67% more stable results compared to chaotic trading.

According to the study the Trading Academy, conducted among 15,000 market participants, 84% of profitable traders use one or more proven strategies, adapting them to personal goals and market conditions. At the same time, beginners often make the critical mistake of trying to master multiple approaches at once without delving into the details of any of them.

The foundation of successful trading

A trading strategy is a set of rules and principles that determine when to enter the market, how much to risk, and when to capture the result. This is not just a set of technical indicators, but an integrated system that takes into account the psychological characteristics of the trader, the market environment and investment goals.

An effective strategy is based on three pillars: clear criteria for entering a position, sound risk management, and disciplined exit from transactions. Without following these principles, even a mathematically winning approach turns into a gamble.

Modern trading strategies are classified according to several parameters: time horizons, trading direction, analysis tools used, and activity level. Understanding this classification helps you choose an approach that suits the individual characteristics and capabilities of the trader.

Trending strategies

Trend strategies are based on the old market wisdom: “the trend is your friend.” These approaches are focused on identifying stable directional price movements and trading in the direction of the prevailing trend.

The “Breakout levels” strategy focuses on the moments when the price overcomes significant areas of resistance or support with increased trading volume. Traders enter the market immediately after confirming the breakout, hoping for a continuation of the movement. Statistics show that correctly identified breakthroughs lead to profitable trades in 73% of cases.

The “Moving Averages” method uses the intersections of various MA to generate trading signals. The classic combination — the intersection of the 50-period and 200-period moving averages — gives a signal of a change in the long-term trend. The ease of use makes this approach popular among novice traders.

The “Momentum correction” approach assumes trading in the direction of the main trend during pullbacks. Traders are waiting for a corrective movement of 30-50% of the previous momentum, then enter the market when there are signs of a resumption of the main trend.

Advantages of trending strategies:

• High profit potential with strong directional movements — individual transactions can bring 100-300% profit.
• The psychological comfort of trading “with the flow” is that the trader feels the support of the market.
• The relative ease of identifying trading opportunities means that trends are visible even to beginners.
• Efficiency at various time intervals — from minute to monthly schedules.
• The possibility of using stop losses to protect capital — losses are limited automatically.
• Suitable for automation — robots can be easily programmed to follow the trend.

Limitations of the approach:

• False signals during sideways market movements — up to 40% of the signals turn out to be inaccurate.
• Late entries when using lagging indicators — the beginning of the movement is missed.
• The need for rapid adaptation to changing market conditions requires constant monitoring.
• Large losses in case of sharp reversals — one unsuccessful trend can negate months of profit.
• Emotional pressure during corrections — it is difficult to hold a position during temporary pullbacks.
• Successful application of trend strategies requires patience and discipline. Trader Mikhail from St. Petersburg uses a combination of breakouts and moving averages in the foreign exchange market, showing stable profitability of 28% per annum over three years.

Successful application of trend strategies requires patience and discipline. Trader Mikhail from St. Petersburg uses a combination of breakouts and moving averages in the foreign exchange market, showing stable profitability of 28% per annum over three years.

Countertrend strategies

Countertrend trading is based on the principle that prices do not move in one direction indefinitely. These strategies are aimed at identifying the moments of exhaustion of the current trend and a potential reversal of the movement.

The Overbought/Oversold Levels strategy uses oscillators like RSI or Stochastic to determine extreme values. When the RSI rises above 70, the market is considered overbought, below 30, oversold. Entry into a position is carried out against the current movement in anticipation of a correction.

The “Divergence” method is based on the discrepancy between price behavior and technical indicators. If the price reaches new highs and the MACD indicator shows lower peaks, this signals a potential reversal. Divergences work especially effectively on higher time intervals.

The Fibonacci Retracement approach uses mathematical levels to determine likely reversal points. Corrections of 38.2%, 50% and 61.8% from the previous movement often become areas of support or resistance where the price can reverse.

Countertrend trading requires precise timing and strict risk control. Statistics show that experienced traders achieve profitability of 65% of trades using these approaches, but beginners often suffer losses due to premature entries.

Characteristics of countertrend strategies:

• High accuracy of inputs when applied correctly — up to 70-80% of profitable trades.
• Small stop losses due to trading from the levels — the risk is limited to 1-2% of the deposit.
• The opportunity to make money in sideways markets is when trending strategies are ineffective.
• The psychological complexity of trading against movement requires iron discipline.
• The need for precise entry timing — a mistake of 5-10 minutes can negate the entire transaction.
• Frequent small losses in case of inaccurate analysis — the price of false signals is quite high.
• Suitable for experienced traders with developed intuition — beginners should avoid it.

Scalping

Scalping is a style of trading focused on extracting profits from minimal price fluctuations over very short time periods. Scalpers hold positions from a few seconds to several minutes, making dozens or hundreds of trades per trading session.

The “Order-booking” strategy is based on the analysis of a glass of orders and the search for imbalances between supply and demand. Scalpers place limit orders in areas of accumulation of orders, making money on the spread between the purchase and sale prices.

The “News scalping” method uses short-term volatility after the release of important economic news. Traders enter the market immediately after the data is published, hoping for a quick movement in any direction.

The “Technical scalping” approach is based on the analysis of minute and five-minute charts using fast indicators. Popular tools are stochastic with a period of 5-8 and moving averages with small periods.

Scalping requirements:

• Fast internet connection and reliable trading platform — even a delay of 100 milliseconds is critical.
• Minimal spreads and commissions — transaction costs eat up profits from small movements.
• High concentration and stress tolerance — it is necessary to maintain focus for 6-8 hours in a row.
• A significant initial capital to compensate for transaction costs is at least $10,000-$25,000.
• Professional trading equipment — several monitors and a powerful computer.
• Access to Level II data — information about the depth of the market and large orders.
• The experience of reading the price and volume feeds is the ability to see the intentions of major players.
• Iron discipline and following the rules are disastrous emotions in scalping.

A professional scalper can make 200-500 trades per day, earning 1-3 points of profit from each operation. At the same time, the coefficient of winning trades often exceeds 80%, but the average profit is minimal, and the risks are concentrated over time.

Scalping is suitable for traders with a certain temperament and technical capabilities. This style requires full commitment and is not compatible with other activities during trading sessions.

Swing trading: the balance between time and profit

Swing trading occupies an intermediate position between short-term scalping and long-term investing. Positions are held from several days to several weeks, which allows you to make money on medium-term price fluctuations.

The “Weekly Reversals” strategy is based on the analysis of weekly charts to determine key support and resistance levels. Swing traders enter a position on a rebound from these levels, hoping for a move to the opposite end of the range.

The “Flags and Pennants” method uses trend continuation patterns to determine entry points. After a strong impulse movement, the price often consolidates in a narrow range, forming a flag or pennant. The breakthrough of this consolidation gives a signal for the continuation of the main trend.

The “Seasonal patterns” approach is based on statistical patterns of behavior of various assets in certain periods of the year. For example, gold traditionally grows in the fourth quarter, while technology stocks show the best dynamics in the first half of the year.

Advantages of swing trading:

• The opportunity to combine with the main job — position analysis and management takes 1-2 hours a day.
• Less stress compared to intraday trading — there is no need to monitor every tick.
• There is enough time for analysis and decision—making – you can carefully study the situation.
• Efficiency in trending markets allows you to capture a significant part of the movement.
• Low transaction costs — rare transactions save on fees.
• Suitable for small deposits — you can start from $1,000-$3,000.
• The possibility of using fundamental analysis — the time horizon allows you to take into account the news.
• It is psychologically comfortable for most traders — it does not require extreme concentration.

Swing trading requires patience and the ability to withstand temporary adverse price movements. Statistics show that the average swing trader holds a position for 5-12 days, earning 15-25% per annum with proper risk management.

Positional trading: a strategy for long-term thinking

Position trading is focused on making profits from long-term trends that last for months or years. This approach requires fundamental analysis and the ability to ignore short-term market fluctuations.

The strategy of “Global Trends” is based on the analysis of macroeconomic factors affecting entire sectors or geographical regions. Position traders study the monetary policy of central banks, geopolitical events, technological revolutions, and demographic changes.

The “Value Investing” method involves buying undervalued assets and holding them until their fair value is restored. Traders analyze the fundamental indicators of companies by comparing market prices with the intrinsic value of assets.

The “Cyclical Analysis” approach uses an understanding of economic and market cycles to determine optimal entry and exit points. Different assets show better dynamics at different stages of the economic cycle.

Features of positional trading:

• Minimal transaction costs due to rare transactions — commissions are less than 0.1% of turnover.
• The ability to use fundamental analysis — time allows you to study financial statements.
• Psychological comfort from the absence of the need for constant monitoring is checking positions once a week.
• It requires considerable patience and discipline — positions are held for months despite fluctuations.
• Large temporary drawdowns — losses can reach 20-30% before turning into a profit.
• The need for a deep understanding of macroeconomics is the impact of interest rates, inflation, and politics.
• Suitable for large—scale investments – effective for deposits starting from $50,000.
• The ability to diversify by assets and regions means reducing specific risks.

Position trading is suitable for investors with long-term goals and the ability to withstand significant temporary drawdowns. The average duration of a position is 3-12 months, and the expected return is 20-40% per annum.

News strategies: trading on information waves

News trading is based on the use of market reaction to the release of important economic data, corporate reports or geopolitical events. These strategies require quick reactions and a deep understanding of the relationship between news and price movements.

The “Before and after the news” strategy involves opening positions before the release of important data in anticipation of a certain market reaction. Traders analyze consensus forecasts and position themselves in the direction of the expected movement.

The “Pending Orders” method uses the placement of buy and sell orders above and below the current price before the news is released. If the market reacts strongly, one of the orders is triggered, and the second one is canceled.

The “Fade Strategy” approach is based on trading against the initial reaction to the news. Traders are waiting for the emotional movement to end and enter the market in anticipation of a return to fair prices.

Risks of news trading:

• High volatility and unpredictability of movements — the price can move in any direction.
• The expansion of spreads at the time of the release of important news — costs increase 2-5 times.
• The possibility of gaps and slippages during the execution of orders — the execution price may differ from the stated one.
• The need for constant monitoring of the information background — skipping important news is critical.
• Short—term trading opportunities – the window for entry is 30-60 seconds.
• Specialized equipment is required — Reuters or Bloomberg terminals cost thousands of dollars.
• High competition with algorithms — robots react faster than humans.
• Emotional pressure from quick decisions — stress can lead to mistakes.

News trading requires specialized skills and technical equipment. Professional news traders use special information terminals and high-speed connections to gain a time advantage.

The psychology of choosing a strategy

The choice of a trading strategy depends not only on market conditions, but also on the psychological characteristics of the trader. Understanding your own temperament, available time, and risk tolerance is critical to successful trading.

Active traders with high stress tolerance tend to scalping and intraday trading. They are willing to spend hours in front of screens, make quick decisions, and put up with frequent small losses for the sake of regular profits.

Traders with a calm temperament and analytical mindset prefer swing trading or positional trading. They appreciate the opportunity for thorough analysis and don’t feel uncomfortable holding positions for long periods.

Strategy selection factors:

• The available time for trading and market analysis is from 30 minutes to 8 hours per day.
• The size of the trading capital and the possibility of its replenishment range from $500 to $100,000+.
• Psychological resistance to stress and losses is the ability to tolerate drawdowns.
• Technical capabilities and access to information — the quality of the Internet and the trading terminal.
• Experience in financial markets — from a complete beginner to a professional.
• The main source of income is trading as a hobby or main profession.
• Asset preferences are currencies, stocks, commodities, or cryptocurrencies.
• Tolerance to the frequency of transactions — from one per month to hundreds per day.
• The ability to learn and adapt is the willingness to explore new approaches.

Novice traders are advised to start with simpler strategies, gradually complicating the approaches as they gain experience. Statistics show that traders who stick to the same strategy throughout the year show better results than those who constantly change their approaches.

Adapting strategies to market conditions

Financial markets are constantly evolving, changing their structure and behavior. Strategies that are effective in some conditions lose their effectiveness in others. Successful traders are constantly adapting their approaches to the current market environment.

Trend strategies show the best results during steady directional movements, which usually occur when fundamental factors or investor sentiment change. Periods of economic uncertainty or geopolitical instability create favorable conditions for trend trading.

Countertrend approaches are more effective during periods of sideways movements and high volatility without a clear direction. Such conditions often occur during lull between important events or during periods of seasonal activity decline.

Signs of a market regime change:

• Changing correlations between different assets — previously related instruments move independently.
• Shifts in volatility and trading volumes — a sharp increase or decrease in activity by 50%+.
• Changing the effectiveness of the usual technical indicators — the signals give opposite results.
• The emergence of new macroeconomic factors of influence is a change in monetary policy or geopolitics.
• Structural changes in the composition of market participants — the arrival of new institutional players.
• Seasonal anomalies start to work in a different way — traditional patterns fail.
• Changing reactions to standard news — the market ignores previously important events.
• The emergence of new trading instruments is the impact of derivatives or ETFs on underlying assets.

Professional traders keep statistics on the effectiveness of their strategies in various market conditions. This allows them to quickly adapt to changes and maintain stable profitability in the long term.

Technological evolution of trading strategies

The development of technology has dramatically changed the landscape of trading strategies. Algorithmic trading, machine learning, and big data analysis have opened up new opportunities for creating and optimizing trading approaches.

High-frequency trading uses powerful computers to make thousands of trades per second, capitalizing on microscopic price discrepancies. This approach is available only to large institutional players with the appropriate infrastructure.

Machine learning algorithms analyze huge amounts of historical data to identify hidden patterns and predict price movements. Neural networks are trained on millions of trading situations, gradually improving their accuracy.

Social trading allows you to copy successful traders’ trades automatically, democratizing access to professional strategies. The platforms aggregate data on the performance of thousands of traders, giving investors a choice.

The impact of technology on trade:

• Reduced transaction costs and increased execution speed — fees dropped from $50 to $1 per transaction.
• Access to advanced analytics and alternative data sources — satellite imagery, social media, weather.
• Automating routine operations and reducing the impact of emotions — robots trade without fear and greed.
• Increased competition and reduced trading opportunities — algorithms eat away at market inefficiencies.
• Democratizing access to professional tools — sophisticated indicators are available to everyone.
• The emergence of new asset classes — cryptocurrencies, tokenized assets.
• The development of social trading is copying the strategies of successful traders.
• Using machine learning for analysis — AI finds hidden patterns.
• Mobile trading is an opportunity to trade from anywhere in the world.

Modern traders use technology as a tool to enhance human abilities rather than replace them. The combination of intuition, experience, and computing power yields the best results in the long run.

Conclusion

Trading strategies are the foundation of successful activity in the financial markets. Not only the financial result, but also the psychological comfort of the trader depends on the choice of the appropriate method. Like a master who chooses the right tool for each task, an experienced market participant adapts his strategies to the current conditions and personal capabilities.

The path to professional trading begins with the study of basic approaches and the gradual accumulation of practical experience. Pocket Option provides all the necessary tools for testing various strategies in a secure demo account environment.

Community The Trading Academy unites thousands of practitioners who are ready to share their experience and help beginners avoid typical mistakes. The joint study of market patterns and the exchange of trading ideas accelerate the professional development of community members.

Success in trading comes to those who combine theoretical knowledge with practical application, constantly improving their skills and adapting to changing market conditions.