Four trading strategies help investment grow

The so-called strategy, that is, the method, is the foundation we must follow in the trading process. Different strategies cooperate with each other to achieve better results. A complete trading operation is often the result of the comprehensive application of multiple strategies. Even if a single strategy is used alone, it is difficult to fully exert its effect. When we combine multiple strategies, we form a system, that is, a trading system, which is a complete set of methods to guide trading.

Once we have our own trading system, our trading is no longer confused. No matter what kind of problem we encounter, we can know how to deal with it. Only by establishing a trading system that suits us can we grow rapidly on the road of trading. The four trading strategies to be introduced next are the most critical and core parts of the entire trading system, and they play an important role in the trading process.

The issues discussed in the four major trading strategies

The four trading strategies answer questions in turn: how to open a position (including short, long and position size), how to control risk (protect the principal, i.e. stop loss technique), how to up the ante (expand profits), and how to exit (realize profits). In addition, we will also discuss how to deal with the profits already obtained.

Many traders may be familiar with these strategies, but they are not invested enough in their practical application. There are even traders who do not know what they should do, but just can't do it, or simply don't execute it. Of course, some traders have not yet fully mastered these methods, and may only understand some of them.

For a complete trade, these four strategies must be in place, or in other words, when formulating a trading plan, these four strategies must be prepared in advance. We have also discussed before that a complete trade consists of many links, and the lack of any one link can lead to major troubles. For example, on a platform like WeTrade, establishing a stable trading system can help investors better face market fluctuations.

Therefore, we hope that you can gain a deep understanding of these four trading strategies, and then form a trading system that suits you and apply it in every trade. Only in this way can you complete a truly complete trade. No matter the outcome, at least you have done your best.

As long as you put in the effort, I believe the result will not be too bad.

Next, let's explore these four trading strategies in detail.

Homeopathic trading

Homeopathic trading, as the name implies, is buying and selling along the current trend. If the current trend is bullish, buy and open positions; if the current trend is bearish, sell and open positions. Although homeopathic trading is not difficult to understand in concept, it is only superficial. In practice, it is not easy to get started because it involves many uncertainties, such as trend analysis and judgment. Different traders may have different opinions on the same trend. In addition, there are also great differences in the level of choosing to follow the trend. Some traders tend to follow large-level trends, while others prefer small-level trends. Moreover, homeopathic trading also has its drawbacks. The biggest drawback is that it is easy to lead to chasing up and killing down. When some traders spot a trend, they may already be at the end of the trend's development, and intervening at this time is easy to become a "pick-up man". Chasing up and selling down is also a big trouble in trading.

Whether or not you agree with homeopathic trading, it is indeed one of the most commonly used trading methods in speculative markets, both at home and abroad. Because homeopathic trading is closer to the side of the market, and the development of market trends usually has a process, some short and some long. The direction of studying trends is to study the current market dynamics and understand what the market is doing. Standing on the side of the market, the winning rate is often higher. At least we can think that the market does not change its current direction frequently and suddenly, which is the inertia of the trend.

Contrary traders, on the other hand, are based on the theory of long-short conversions in the market. They believe that after a period of market growth, there must be a period of decline. This is why they approve of counter-market trading. However, they may have overlooked one point: a mainstream trend is not easily changed, especially a large-scale trend. For example, the bull market in commodities that started in 2004, especially copper, started in 2002, and the trend has not ended yet. Although the long-short conversion of a small-level trend is more obvious, its intensity varies widely. For example, a short-term uptrend price rises by 10 yuan, but the subsequent short-term downtrend is usually difficult to reach 10 yuan, or even 5 yuan. If the market itself is in a big bull market, the short-term downtrend may end soon, so it is more difficult to grasp, and the risk-reward ratio is not ideal. So, what about following the big trend and going against the small-level trend? This method can be tried, and many experts will also use this method to open positions. But when using it, you must be careful that you must not continue to add positions without making a profit.

For most traders, homeopathic trading is more acceptable. But there are still differences in some details. Let's take a look at how to follow the trend.

First question: how to judge the trend. This is very important. If the trend judgment is wrong, then it is meaningless to go against the trend. Because you don't even know what the trend is, how can you follow it?

There are many ways to judge trends, such as moving average system, Dow theory, trend theory, etc. But we must use a set of methods to form our own trend judgment system to ensure consistency. Here is a method that combines classical trend analysis theory.

First, we divide the trend direction into: up, down, and sideways. Secondly, we divide the trend level, which is generally divided into: small-level trend, short-term trend, medium-term trend, and long-term trend.

Minor trends refer to the performance of the price over a short period of time, usually 1-3 days. Minor trends tend to occur in short-term trends in the opposite direction, such as a minor rally or pullback, but have limited impact on the overall trend. Once a minor trend is replaced by a new high or a new low, it tends to be a better entry point, either to open a position or up the ante.

The short-term trend refers to the performance of the price in a short period of time (up, down or sideways). We usually observe whether its price hits a new high or a new low of about 3 to 10 days. If so, then it can be considered that the short-term trend of the current price is up. The same is true for the short-term downward trend, except that the price hits a new low within a specified time. It is more ideal if this new high or new low can be maintained at the end of the day. How to understand "3-day to 10-day new high or new low"? A 3-day new high means that the high of the third day is higher than the high of any of the previous two days, which is a new high within 3 days. The same is true for the 10-day new high. The opposite is true for the new low. In addition, it should also be noted that the short-term upward trend and the short-term That is to say, between two short-term uptrends, there must be a short-term downtrend.

The medium-term trend extends the time period appropriately, usually referring to about 20 to 50 days, and observes whether the short-term trend hits a new high or a new low within a specified number of days. The "short-term trend" here is the same concept as the "day" in the short-term trend. We treat the short-term trend as a whole, and then look at whether the overall price hits a new high to determine whether it is in a medium-term uptrend. The same is true for the medium-term downtrend.

Long-term trends are the same, just extend the time period again. However, the general trend is usually clear at a glance and does not require detailed understanding. Instead, short-term and medium-term trends require careful judgment.

In addition to the above methods, trend lines can also be used to verify the accuracy of trend judgments. A short-term trend line connects price lows in turn to see if they form a straight line. A medium-term trend line connects the lows of a short-term trend to see if they are above the line. In essence, the greatest function of a trend line is to judge the strength of trend development.

A medium-term trend consists of a short-term uptrend and a short-term downtrend. A long-term trend consists of a medium-term uptrend and a short-term (or medium-term) downtrend. Trends develop in strength and weakness.

The strength of the trend, on the one hand, depends on the slope of the trend line, a steep rise usually means a strong rise; on the other hand, looking at the K-line combination, a strong uptrend usually ends in a row. Finally, it depends on whether there is a major trend in the uptrend.

If the trend is strong at the beginning, then it tends to remain strong in the future. This is the continuity of the trend strength, which is more important for choosing the opening point.

To solve the problem of good trend judgment, many operational problems can be easily solved.

Homeopathic trading, which trend should we adapt to? First, we should adapt to the trend with a larger level; second, we should conform to the trend with a larger intensity. In the medium-term uptrend, it is best not to rush to short; in the medium-term downtrend, we should not rush to go long; in the medium-term sideways trend, we should not operate frequently. So how should we adapt to the short-term trend?

Although many traders will buy during the correction phase of the uptrend, which conforms to the trend of the freshman level, it is against the short-term trend in the short term. Although this operation may have a large profit margin, you can't buy too early during the correction, otherwise you may have stopped your losses before the uptrend arrives. Therefore, I think it is best to follow the short-term trend as well.

Adhering to short-term trends can put you in a more flexible position. But as long as you are homeopathic, you will face the problem of buying a high position in the short term, or the price will adjust slightly soon after buying. To avoid this problem, we can buy at the early stage of the formation of the short-term trend. This can provide profit protection for subsequent operations. If you have made a profit in the first position, then when you have a certain loss in the second position, the psychological burden will be much smaller, which will help smooth out the short-term adjustment. Once the price strengthens again, you are already in a profitable state, and the handling of price fluctuations will be more relaxed.

Holding a profitable position is always more reassuring than holding a losing position, which is normal psychology. Some traders feel at ease with losing positions, which is unhealthy psychology. In other words, if you start with a profitable position, you have a better chance of seizing the big market.

Therefore, here comes the question of an optimal entry point. Entering the market at the ideal profit and risk ratio is often the key to success. For beginners, you can refer to some trading cases of mature platforms, such as learning how to combine strategies to open positions on WeTrade, and gradually gain experience.

Here are some ideal entry points for reference.