When you enter the world of trading, you run into a plethora of new terms, approaches, and practices. But perhaps nothing remains more important than learning about trading strategies that serve as the heart and soul of your profession as a trader.
To help you get a headstart with all the basics, here is an overview of different types of trading strategies.
Buy and Hold
This strategy is self-explanatory and calls for you to hold onto your purchased assets instead of actively trading them on the market. The goal of this trading strategy is to let the value of your asset increase on its own. While buy and hold is a passive trading strategy, it still requires you to be vigilant about the assets you are literally banking your funds on. This strategy is also popular in cryptocurrency trading, where it is often called “HODL.”
Day Trading
Day trading is one of the most active trading practices in the market. This approach, which remains especially popular in forex strategies, is all about buying and selling your assets multiple times in the same day for even the smallest gains. The aim of this strategy is to capitalise on minute profits and have them add up to a noticeable income at the end of the day. Since day trading can be just as demanding as a day job, it is the primary source of income for many traders.
Value Investing
If you are open to riskier trading approaches, you might like the tightrope walk that value investing does in this category. In this strategy, you buy assets that you believe to be undervalued due to a temporary reaction by the market. Once the market reaction subsides, the asset’s previous market value may rerate to the appropriate value or even go beyond expectations. In order to be successful in this strategy and make informed decisions, you need to have your finger on the pulse of the market.
Growth Trading
Growth trading is yet another strategy where you bank on your knowledge of the market. This strategy refers to the overall average growth of an asset as compared to direct competitors, as well as its potential for future gains in the long run. Growth trading is a long-term strategy. It can also be risky due to the possibility of certain assets halting their growth in the middle. best forex broker This makes it important for you to choose this method only if you are confident in your market expertise.
Momentum Trading
Momentum trading is a more laid-back approach than the risks you take in many trading strategies. This practice involves you identifying and buying assets that already have an upwards momentum in hopes that they will continue their progress. You then sell the assets once they start decreasing in value. While you can take your time in judging the overall trajectory of an asset, you need to act fast and sell your assets once the momentum reverses course. best forex trading brokers But for many traders, it remains a profitable approach.
By learning about these different types of trading strategies, you can determine which approach is the most suitable for you. This allows you to have different tools to make the most out of your trading activities.
