Most successful trading strategies

Best Forex trading strategies that work.

You may have heard that maintaining your discipline is a key aspect of trading. While this is true, how can you ensure you enforce that discipline when you are in a trade?

One way to help is to have a trading strategy that you can stick to.

If it is well-reasoned and backtested, you can be confident that you are using one of the successful Forex trading strategies. That confidence will make it easier to follow the rules of your strategy—therefore, to maintain your discipline.

A lot of the time when people talk about Forex strategies, they are talking about a specific trading method that is usually just one facet of a complete trading plan. A consistent Forex trading strategy provides advantageous entry signals, but it is also vital to consider:

Picking the best Forex strategy for you.

When it comes to what the best Forex trading strategy is, there really is no one single answer.

The best FX strategies will be suited to the individual. This means you need to consider your personality and work out the best Forex strategy to suit you.

What may work very nicely for someone else may be a disaster for you. Conversely, a strategy that has been discounted by others, may turn out to be right for you.

Therefore, experimentation may be required to discover the Forex trading strategies that work . Vice versa, it can remove those that don't work for you.

One of the key aspects to consider is a timeframe of your trading style.

The following are some trading styles, from short time-frames to long, which have been widely used during previous years and still remain to be a popular choice from the list of best Forex trading strategies in 2017.

Scalping . These are very short-lived trades, possibly held just for just a few minutes. A scalper seeks to quickly beat the bid/offer spread and skim just a few points of profit before closing. Typically uses tick charts, such as the ones that can be found in MetaTrader 4 Supreme Edition.

Day trading . These are trades that are exited before the end of the day, as the name suggests. This removes the chance of being adversely affected by large moves overnight. Trades may last only a few hours and price bars on charts might typically be set to one or two minutes.

Swing trading . Positions held for several days, looking to profit from short-term price patterns. A swing trader might typically look at with bars showing every half hour or hour.

Positional trading . Long-term trend following, seeking to maximise profit from major shifts in prices. A long-term trader would typically look at the end of day charts.

The role of price action in Forex strategies.

To what extent fundamentals are used varies from trader to trader. At the same time, the best FX strategies invariably utilise price action.

This is also known as technical analysis.

When it comes to technical currency trading strategies, there are two main styles: trend following, and counter-trend trading. Both of these FX trading strategies try to profit by recognising and exploiting price patterns.

When it comes to price patterns, the most important concepts are those of support and resistance.

Put simply, these terms represent the tendency of a market to bounce back from previous lows and highs. Support is the market's tendency to rise from a previously established low. Resistance is the market's tendency to fall from a previously established high.

This occurs because market participants tend to judge subsequent prices against recent highs and lows.

What happens when the market goes near recent lows? Put it simply, buyers will be attracted to what they see as cheap.

What happens when the market goes near recent highs? Sellers will be attracted to what they see as either expensive, or a good place to lock in a profit.

Thus recent highs and lows are the yardstick by which current prices are evaluated .

There is also a self-fulfilling aspect to support and resistance levels. This happens because market participants anticipate certain price action at these points and act accordingly.

As a result, their actions can contribute to the market behaving as they expected.

However, it's worth noting three things:

support and resistance are not iron-clad rules, they are simply a common consequence of the natural behaviour of market participants trend-following systems look to profit from those times when support and resistance levels break down counter-trending styles of trading are the opposite of trend following—they look to sell when there's a new high and buy when there's a new low.

Trend-following Forex strategies.

Sometimes a market breaks out of a range, moving below support or above resistance to start a trend. How does this happen?

When support breaks down and a market moves to new lows, buyers begin to hold off. This is because buyers are constantly seeing cheaper prices being established and want to wait for a bottom to be reached.

At the same time, there will be traders who are selling in panic or simply being forced out of their positions. The trend continues until the selling is depleted and belief starts to return to buyers that the prices will not decline further.

Trend-following strategies buy markets once they have broken through resistance and sell markets once they have fallen through support levels. Trends can be dramatic and prolonged , too.

Because of the magnitude of moves involved, this type of system has the potential to be the most successful Forex trading strategy. Trend-following systems use indicators to tell when a new trend may have begun but there's no surefire way to know of course.

Here's the good news.

If the indicator can distinguish a time when there's an improved chance that a trend has begun, you are tilting the odds in your favour. The indication that a trend might be forming is called a breakout .

A breakout is when the price moves beyond the highest high or lowest low for a specified number of days. For example, a 20-day breakout to the upside is when the price goes above the highest high of the last 20 days.

Trend-following systems require a particular mindset. Because of the long duration—during which time profits can disappear as the market swings—these trades can be more psychologically demanding.

When markets are volatile, trends will tend to be more disguised and price swings will be greater. This means a trend-following system is the best trading strategy for Forex markets that are quiet and trending.

An example of a simple trend-following strategy is a Donchian Trend system.

Donchian channels were invented by futures trader Richard Donchian and are indicators of trends being established. The Donchian channel parameters can be tweaked as you see fit, but for this example we will look at a 20-day breakout.

Basically, a Donchian channel breakout suggests either of two things:

buying if the price of a market goes above the high of the prior 20 days selling if the price goes below the low of the prior 20 days.

There is an additional rule for trading when the market state is more favourable to the system. This rule is designed to filter out breakouts that go against the long-term trend.

In short, you look at the 25-day moving average and the 300-day moving average. The direction of the shorter moving average determines the direction that is permitted.

This rule states that you can only go:

short if the 25-day moving average is lower than the 300-day moving average long if the 25-day moving average is higher than the 300-day moving average.

Trades are exited in a similar way to entry , but using a 10-day breakout. This means that if you open a long position and the market goes below the low of the prior 10 days, you want to sell to exit the trade—and vice versa.

Learn to trade step-by-step with our brand new educational course, Forex 101, featuring key insights from professional industry experts.

Counter-trend Forex strategies.

Counter-trend strategies rely on the fact that most breakouts do not develop into long-term trends. Therefore, a trader using such a strategy seeks to gain an edge from the tendency of prices to bounce off previously established highs and lows.

On paper, counter-trend strategies are the best Forex trading strategies for building confidence because they have a high success ratio.

However, it's important to note that tight reins are needed on the risk management side. These Forex trade strategies rely on support and resistance levels holding. But there is a risk of large downsides when these levels break down.

Constant monitoring of the market is a good idea. The market state that best suits this type of strategy is stable and volatile. This sort of market environment offers healthy price swings that are constrained within a range.

Do note, though, that market can switch states . For example, a stable and quiet market might begin to trend, while remaining stable, then become volatile as the trend develops.

How the state of a market might change is uncertain. You should be looking for evidence of what the current state is, to inform whether it suits your trading style.

Discovering the best FX strategy for you.

Many types of technical indicators have been developed over the years. The great leaps forward made with online trading technologies have made it much more accessible for individuals to construct their own indicators and systems.

You can read more about technical indicators by checking out our education section or the trading platforms we offer. A great starting point would be some of the simple, well-established strategies that have worked for traders already.

By trial and error, you should be able to learn Forex trading strategies that best suit your own style. Go ahead and try out your strategies risk-free with our demo trading account.

Top-10 viewed articles.

MetaTrader 4.

Forex & CFD trading platform.

iPhone App.

MetaTrader 4 for your iPhone.

Android App.

MT4 for your Android device.

MT WebTrader.

Trade in your browser.

MetaTrader 5.

The next-gen. trading platform.

MT4 for OS X.

MetaTrader 4 for your Mac.

Start Trading.

Platforms.

Education.

Promotions.

Risk warning: Trading Forex (foreign exchange) or CFDs (contracts for difference) on margin carries a high level of risk and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your entire investment. Therefore, you should not invest or risk money that you cannot afford to lose. Before using Admiral Markets UK Ltd or Admiral Markets AS’ services, please acknowledge all of the risks associated with trading.

The content of this website must not be construed as personal advice. We recommend that you seek advice from an independent financial advisor.

All references on this site to ‘Admiral Markets’ refer jointly to Admiral Markets UK Ltd and Admiral Markets AS. Admiral Markets’ investment firms are fully owned by Admiral Markets Group AS.

Admiral Markets UK Ltd is registered in England and Wales under Companies House – registration number 08171762. Admiral Markets UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA) – registration number 595450. The registered office for Admiral Markets UK Ltd is: 16 St. Clare Street, London, EC3N 1LQ, United Kingdom.

Admiral Markets AS is registered in Estonia – commercial registry number 10932555. Admiral Markets AS is authorised and regulated by the Estonian Financial Supervision Authority (EFSA) – activity license number 4.1-1/46. The registered office for Admiral Markets AS is: Ahtri 6A, 10151 Tallinn, Estonia.

Day Trading: Strategies for Beginners.

Day trading is a worthwhile activity, but you must know what you are doing. There is a technique that will help you succeed at day trading, but you have to first learn what it is. For example, there are many day trading strategies for the beginning trader. When you know what they are, day trading will be much more rewarding and fun because you will be winning. These Day trading strategies are crucial to know if you want to be a successful day trader. Every day trader has at least a few favorite strategies that he falls back on again and again. What works for one person may not work for another, though, so it pays to learn as many as possible in the beginning. As you gain more experience as a day trader, you'll get to know additional strategies, including variations on the ones highlighted above. Before too long, you'll have a selection of strategies that will help you achieve long-term success as a day trader.

Basic Day Trading Strategies.

There are a few basic rules that will help you achieve ongoing success as a day trader. They apply to all day trading strategies. The most important one is to not allow yourself to be ruled by emotion. Emotions have no place in any successful day trading strategy. So-called gut reactions only lead to trouble. One of the reasons that emotions are bad news for day traders is that they can make you deviate from your chosen strategy. This brings us to our second rule, which is to stick with your game plan. No matter which strategy you are following, you need to see it through. Persistence is key. Finally, you must be able to recognize and understand trading indicators. Otherwise, it is impossible to achieve success with any of the most effective strategies.

The Best Day Trading Strategies for Day Traders.

There are dozens of day trading strategies. Avoid becoming overwhelmed by learning these four basic strategies first:

News Trading: When a major news event occurs that affects the stock market, savvy day traders spring into action. Using this strategy is as simple as keeping up to date with current news stories and moving quickly to buy or sell as needed. Range Trading: This is where in-depth research and patience really pay off. Learn the normal high and low range of a specific stock and always trade within it. Pairs Trading: As the name implies, this strategy involves trading in pairs. Choose a category, and then go short on a weak stock and long on a strong one. By making these trades simultaneously, you dramatically increase your odds of achieving remarkable profits. Contrarian Trading: Despite what the current momentum of a stock suggests, this strategy requires you to trade against it. Many beginning day traders struggle with this strategy, but more seasoned traders know that it's a terrific way to make some serious money.

Day Trading Strategies On the Move.

Day trading is all about energy. When I first started implementing day trading strategies, I learned that the only way to be good at it is to find stocks that are on the move. Thankfully, there is a stock that is making a 20 or 30 percent move every day. We have to find those stocks before they begin to move, and I have discovered that these stocks have some technical indicators in common before they begin to move. First, we must ask ourselves what we expect from day trading strategies that are on the move. It’s necessary for the stock to be moving. If they are moving sideways, we cannot work with them. Therefore, the stock must be moving up or down. Stock scanners locate these stocks very well. Then, I can trade the stocks when they are at extremes. This means that the stock is doing something that it hasn’t done all year and that the price action is very clean.

Day Trading Strategies and What You Need to Find.

When you use these strategies, you find that there is something similar about stocks that are moving. We can scan 5,000 stocks and look for similar criteria. This will give you up to 10 stocks each day. These stocks may move 20 to 30 percent in a day, and this is how I make my living.

The first criteria: The float must be under 100 million shares. The second criteria: The daily charts must be strong. That means that the stock does not have resistance nearby and it is above the Moving Averages. The third criteria: The High Relative Volume is at least two times above average. The fourth criteria: This is optional. There will be a fundamental catalyst. A fundamental catalyst may be an announcement made by the FDA. If the stock is moving without a fundamental catalyst, it is known as a “technical breakout.”

How I Find Stocks for My Day Trading Strategies.

I use stock scanners to scan the market for the criteria that I listed above. The stock scanner is highly necessary for putting day trading strategies into effect. The scanners let me know that something is happening. Then, I can check the candle stick chart to find an entry point on the first pull back. A majority of buyers get into the market here, and the stock moves up sharply. As the price begins to move up quickly, you must be able to find the best entry point at the time that it is happening. I do this by performing three different kinds of scans with three different kinds of stock scanners. The three scanners I have are my Pre-Market Gapper scanners, Reversal Trading Strategies Scanners and Momentum Day Trading Strategies scanners. I receive several trade alerts every day from these scanners. I never have to look through the charts manually. The scanners allow me to see all the stocks in their current positions. Stock scanners are the only thing you should use to find the best stocks.

Day Trading Strategies - Reduce Risks.

The following day trading strategies explain how to reduce your risks and increase your chances of making money with day trading.

Chart Patterns Day traders often find chart patterns to be a proven tool for finding entry and exit points for investments. Reliability is improved if the chart patterns are used in combination with technical indicators such as the commodity-channel index (CCI), the rate of change (ROC), the relative-strength index (RSI) and the moving average. Experienced day traders may also use a variety of other technical indicators. This is a famous trading strategy. Technical Indicators As mentioned, technical indicators are vital tools for day traders. These indicators show interesting trends that can be used by a smart trader to realize a solid profit from following complex changes in the stock market. Carefully watching momentum indicators such as the moving average, RSI, ROC, CCI and others over brief periods of furious activity holds the promise of improved profits for virtually any short-term investor.

Naturally, knowing exactly when to enter and when to exit from an investment opportunity is the biggest factor in day-trading profitability. A competent day trader will study longer-term market trends to gain an understanding of what shorter-term changes may mean. Investment instruments typically exhibit demand and resistance zones. Examining a strong demand zone for a particular investment usually will reveal a good entry point for taking a long position. Likewise, examining a strong resistance zone usually will show a good entry point for taking a short position. Paying close attention to such details can significantly reduce the risks and increase the potential upsides for your investments.

Best time Entry One of the most important trading strategies is the right time entry. The most efficient day trading entry tactic is sturdy support and getaway of strong resistance. The lowest risk entry point with the highest return opportunity is when the stock price hits strong support demand zone. Happy Exits Your bank account can grow much larger if you use the right methods for your day trading. Keep in mind that your profits do not actually exist until you sell an investment to take the profits. Unrealized profits from holding on to an investment can disappear at any moment. Strong-resistance, Fibonacci-number, 50MA or 200MA exit strategies all have been successfully used to sell investments in a timely fashion.

Quite a few people seek to make money with day trading strategies , but such activities are highly risky. Investing for the long term by buying and holding investment instruments can make a lot of sense, especially after studying the history of a specific company or industry sector and the market potential of its associated services and products, but day traders tend to only look briefly at a company or investment vehicle before deciding to buy or sell. Many industry experts think this is not much better than common gambling, which is why the Securities and Exchange Commission has tried to protect small-fund investors by placing a number of restrictions on how they are allowed play the stock market in this manner. This article will demonstrate 4 main trading strategies that has been successful.

Successful Day Trading Strategies.

The following trading strategies explain how to reduce your risks and increase your chances of making money with day trading using the right tools as real time news and ToS .

Picking the Instruments You should begin by deciding on your favored instruments for investment . You can choose stocks, indexes, ETFs, options, commodities or futures. Each instrument has its own quirks and risk levels. If you prefer to focus on an entire economic sector such as commercial real estate, then choosing sector-related ETFs is your best bet. Please note that most ETFs show low beta, which means that large changes in the stock market will produce smaller changes in those ETFs. High-beta ETFs that change a lot when the stock market rises or falls are better for day trading. You have to be careful when picking your trading strategy.

In any case, you should decide up front which instruments will work best for your preferred levels of risk.

Stop-Loss Orders Day trading without stop-loss orders is like walking on a tight wire without a safety net. A serious fall can hurt you badly. Before you accept an investment, set up a stop-loss order to prevent the possibility of losing all your money before you realize what is happening. Moving averages and pivot points are good indicators for stop-loss orders. This is a very popular trading strategy. Real Time News One of your most important tools for seeking profits and avoiding losses is a reliable source of real-time news. Impressive numbers of stock-market traders jump every day on the latest news as the basis for deciding to buy new instruments or to sell their current holdings, which means that even a few seconds may make the difference between making money and losing money. Events that instantly affect the stock market may include a report on general economic activity from a government or private agency, a press release about a company’s current earnings, a policy change at the Federal Reserve, a product or commercial-service announcement, a significant political development in a major trading country or a sudden natural disaster.

Subscribing to a penny-stock news-reporting service can be useful, but the quality and reliability of such services may vary greatly. Some day traders set up a suite of custom searches at a major search engine that returns a steady stream of relevant news.

Time Over Sales Closely monitoring real-time sales data is critical. If unusually large orders for an instrument appear at the current asking price or above it, then you can take advantage of this by entering longer positions. Waiting for the strong demand behind this behavior to further increase the instrument’s asking price can result in a hefty profit. Likewise, seeing unusually large orders at the current bid price or lower quite likely means it’s time to enter short positions and to abandon longer positions for that instrument. This sort of potentially profitable event does not happen often, but patiently waiting for such opportunities is the most likely path to success with trading strategies.

A Simple Conclusion.

No matter what day trading strategies you adopt, consistency is the key. Make a plan, and stick with it. Even penny-stock trading falls under the same rules. Traders who keep their hearts still and their eyes open will always do better than wild traders who don't think first. Stay calm and focused, and you will find your way to wealth.

Latest Posts.

5 Things Traders Will Watch in January.

Top Market Risks for 2018 all Traders Need to Know.

How to Trade During the End of the Year.

Lessons from Past Flash Crashes.

CME & NYMEX Futures Trading Hours Extended.

Latest Communications.

CME & NYMEX Futures Trading Hours Extended.

Update: Omega & Lynx Available.

Release: New Peg Order Types for TSX Dark Destination (11/22)

PPro8 Release: Anku 0.34.3 for Live and TMS.

Now Announcing the Winners of the Aequitas NEO Contest!

Open your own Trading Office. Use our Full-Service Platform and Trading Capital.

Focus on managing traders and performance only. Leave the hassle to us.

Top 4 Things Successful Forex Traders Do.

Trading in the financial markets is surrounded by a certain amount of mystique, because there is no single formula for trading successfully. Think of the markets as being like the ocean and the trader as a surfer. Surfing requires talent, balance, patience, proper equipment and being mindful of your surroundings. Would you go into water that had dangerous rip tides or was shark infested? Hopefully not.

The attitude to trading in the markets is no different than the attitude required for surfing. By blending good analysis with effective implementation, your success rate will improve dramatically and, like many skill sets, good trading comes from a combination of talent and hard work. Here are the four legs of the stool that you can build into a strategy to serve you well in all markets.

[There are many different skills required to be a successful short-term trader, ranging from technical analysis to money management. Investopedia's Become a Day Trader Course will show you a proven strategy that includes six different kinds of trades that can be applied in any market. With over five hours of on-demand video, exercises, and interactive content, you'll learn from a Wall Street veteran how to have the confidence and knowledge to execute trades on a daily basis.]

Before you start to trade, recognize the value of proper preparation. The first step is to align your personal goals and temperament with the instruments and markets that you can comfortably relate to. For example, if you know something about retailing, then look to trade retail stocks rather than oil futures, about which you may know nothing. Begin by assessing the following three components.

The time frame indicates the type of trading that is appropriate for your temperament. Trading off a five-minute chart suggests that you are more comfortable being in a position without the exposure to overnight risk. On the other hand, choosing weekly charts indicates a comfort with overnight risk and a willingness to see some days go contrary to your position.

In addition, decide if you have the time and willingness to sit in front of a screen all day or if you would prefer to do your research quietly over the weekend and then make a trading decision for the coming week based on your analysis. Remember that the opportunity to make substantial money in the markets requires time. Short-term scalping, by definition, means small profits or losses. In this case, you will have to trade more frequently.

Once you choose a time frame, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Yet others like to trade using indicators such as MACD and crossovers.

Once you choose a system or methodology, test it to see if it works on a consistent basis and provides you with an edge. If your system is reliable more than 50% of the time, you will have an edge, even if it's a small one. If you backtest your system and discover that had you traded every time you were given a signal and your profits were more than your losses, chances are very good that you have a winning strategy. Test a few strategies and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames.

You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system's "personality" matches with the instrument being traded. For example, if you were trading the USD/JPY currency pair in the forex market, you may find that Fibonacci support and resistance levels are more reliable in this instrument than in some others. You should also test multiple time frames to find those that match your trading system best.

Attitude in trading means ensuring that you develop your mindset to reflect the following four attributes:

Once you know what to expect from your system, have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade. In other words, don't chase the bus after it has left the terminal; wait for the next bus.

Discipline is the ability to be patient - to sit on your hands until your system triggers an action point. Sometimes, the price action won't reach your anticipated price point. At this time, you must have the discipline to believe in your system and not to second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true for stop losses.

Objectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you know have a high reliability factor, then you don't need to become emotional or allow yourself to be influenced by the opinion of pundits who are watching their levels and not yours. Your system should be reliable enough so that you can be confident in acting on its signals.

Even though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $250 in your trading account and expect to make $1,000 each trade. Although neither a short-term nor longer term time frame is necessarily safer than the other, the short-term time frame may involve smaller risks if the trader exercises discipline in picking trades. It's a question of risk versus reward.

Different instruments trade differently depending on who the major players are and why they are trading that particular instrument. Hedge funds are motivated differently than mutual funds. Large banks that are trading the spot currency market in specific currencies usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players then you can often piggyback them and profit accordingly.

Pick a few currencies, stocks or commodities and chart them all in a variety of time frames. Then apply your particular methodology to all of them and see which time frame and which instrument is most responsive to your system. This is how you discover a "personality" match for your system. Repeat this exercise regularly to adapt to changing market conditions.

Leg No. 4 - Management (Implementation)

Since there is no such thing as only profitable trades, no system will trigger a 100% sure thing. Even a profitable system, say with a 65% profit to loss ratio, still has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade.

In the end, successful trading is all about risk control. Take losses quickly and often, if necessary. Try to get your trade in the correct direction right out of the gate. If it backs off, cut out and try again. Often, it is on the second or third attempt that your trade will move immediately in the right direction. This practice requires patience and discipline, but when you get the direction right, you can trail your stops and usually be profitable at best, or break even at worst.

There are as many nuanced methods of trading as there are traders. There is no right or wrong way to trade. There is only a profit-making trade or a loss-making trade. Warren Buffet says there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1. Stick a note on your computer that will remind you to take small losses often and quickly - don't wait for the big losses.

4 Common Active Trading Strategies.

Active trading is the act of buying and selling securities based on short-term movements to profit from the price movements on a short-term stock chart. The mentality associated with an active trading strategy differs from the long-term, buy-and-hold strategy. The buy-and-hold strategy employs a mentality that suggests that price movements over the long term will outweigh the price movements in the short term and, as such, short-term movements should be ignored. Active traders, on the other hand, believe that short-term movements and capturing the market trend are where the profits are made. There are various methods used to accomplish an active-trading strategy, each with appropriate market environments and risks inherent in the strategy. Here are four of the most common types of active trading and the built-in costs of each strategy. (Active trading is a popular strategy for those trying to beat the market average. To learn more, check out How To Outperform The Market .)

Day trading is perhaps the most well known active-trading style. It's often considered a pseudonym for active trading itself. Day trading, as its name implies, is the method of buying and selling securities within the same day. Positions are closed out within the same day they are taken, and no position is held overnight. Traditionally, day trading is done by professional traders, such as specialists or market makers. However, electronic trading has opened up this practice to novice traders. (For related reading, also see Day Trading Strategies For Beginners .)

[ Learning which strategy is going to work best for you is one of the first steps you need to take as an aspiring trader . If you're interested in day trading, Investopedia Academy's Day Trader Course can teach you a proven strategy that includes six different types of trades. ]

Some actually consider position trading to be a buy-and-hold strategy and not active trading. However, position trading, when done by an advanced trader, can be a form of active trading. Position trading uses longer term charts - anywhere from daily to monthly - in combination with other methods to determine the trend of the current market direction. This type of trade may last for several days to several weeks and sometimes longer, depending on the trend. Trend traders look for successive higher highs or lower highs to determine the trend of a security. By jumping on and riding the "wave," trend traders aim to benefit from both the up and downside of market movements. Trend traders look to determine the direction of the market, but they do not try to forecast any price levels. Typically, trend traders jump on the trend after it has established itself, and when the trend breaks, they usually exit the position. This means that in periods of high market volatility, trend trading is more difficult and its positions are generally reduced.

When a trend breaks, swing traders typically get in the game. At the end of a trend, there is usually some price volatility as the new trend tries to establish itself. Swing traders buy or sell as that price volatility sets in. Swing trades are usually held for more than a day but for a shorter time than trend trades. Swing traders often create a set of trading rules based on technical or fundamental analysis; these trading rules or algorithms are designed to identify when to buy and sell a security. While a swing-trading algorithm does not have to be exact and predict the peak or valley of a price move, it does need a market that moves in one direction or another. A range-bound or sideways market is a risk for swing traders. (For more on swing trading, see our Introduction To Swing Trading .)

Scalping is one of the quickest strategies employed by active traders. It includes exploiting various price gaps caused by bid/ask spreads and order flows. The strategy generally works by making the spread or buying at the bid price and selling at the ask price to receive the difference between the two price points. Scalpers attempt to hold their positions for a short period, thus decreasing the risk associated with the strategy. Additionally, a scalper does not try to exploit large moves or move high volumes; rather, they try to take advantage of small moves that occur frequently and move smaller volumes more often. Since the level of profits per trade is small, scalpers look for more liquid markets to increase the frequency of their trades. And unlike swing traders, scalpers like quiet markets that aren't prone to sudden price movements so they can potentially make the spread repeatedly on the same bid/ask prices. (To learn more on this active trading strategy, read Scalping: Small Quick Profits Can Add Up . )

Costs Inherent with Trading Strategies.

There's a reason active trading strategies were once only employed by professional traders. Not only does having an in-house brokerage house reduce the costs associated with high-frequency trading, but it also ensures a better trade execution. Lower commissions and better execution are two elements that improve the profit potential of the strategies. Significant hardware and software purchases are required to successfully implement these strategies in addition to real-time market data. These costs make successfully implementing and profiting from active trading somewhat prohibitive for the individual trader, although not all together unachievable.

Active traders can employ one or many of the aforementioned strategies. However, before deciding on engaging in these strategies, the risks and costs associated with each one need to be explored and considered. (For related reading, also take a look at Risk Management Techniques For Active Traders .)