Trading can be difficult at timesespecially for many new and inexperienced day traders. to a lot faltering merchantsthere is usually There is no easy way out Because managing a successful account requires skills and experience.
In this article, we will look at some of the best trading strategies that many struggling trades (even some professionals) can use to restart their careers.
Use of moving averages
One of the easiest commerce strategies Anyone can master it using moving averages. A moving average is an indicator that looks at the average price of an asset over a given period. The basic moving average is calculated by adding the asset prices and then dividing by the number of periods.
Simple moving average (SMA) has some challenges because it takes all periods evenly. For example, in a 200-day moving average, the current number is the same as 200 days ago. Therefore, there are many moving averages that solve this situation.
Examples of these averages are:
All of these moving averages are used in the same way in day trading.
trend following
There are several strategies for using the moving average indicator. First, you can use the moving average to follow the trend. This is where you decide to buy an asset when the price is above the moving average or short when the price is below the moving average.
The goal is that the asset will continue to rise as long as it is above the moving average and vice versa. A good example of this is shown in the chart below. As you can see, the Nasdaq 100 has been above the 25-period moving average for a while.
So, a simple strategy is Find a trending originAnd Moving average applicationand then Place an upward trade. You should then exit the trade when the asset moves below the moving average.
Crossing
Another simple strategy for using a moving average is to simply wait for the crossover. This process works in a relatively simple way. The idea is to apply a moving average to the chart and then wait for the asset to cross it.
If it exceeds it at the topthis is a sign of it Bears are dominant. On the other hand, if it crosses it on a lower side, then this is a sign that the price will continue to rise in the near term.
What to consider when using moving averages
Use moving averages in this approach It is a relatively easy process. There are many things you can do to improve your score when using the moving average strategy. Firstly, Always include volume in your trading charts.
The idea behind the scale is simple. If an asset rises above the moving average in a high volume environmentthere is a possibility that it is The price will continue to rise for some time. On the other hand, if amount He is Limitedthe Earnings will not have legs.
The other important thing to note about moving averages is that The period or length is important. in most periods. As shown above, we have used the 25-period moving average to follow the trend. Some people use a different number, some use the 10 period and others use the 7 period moving average.
Finally, you should Consider the type of moving average that you will use. Some of the most popular types of moving averages are exponential, smooth, volume-weighted, and least squares among others.
Using the VWAP strategy
In addition to using moving averages in day trading, The other strategy You can use it well is the volume weighted average price (VWAP). While some think VWAP is similar to moving averages, there is a big difference.
the VWAP simply looks at the average price out in a certain period when adjusting to size. So, the pointer It can only be used during the day Charts like 5 minutes and 15 minutes. It cannot work in longer charts like daily and weekly.
Concept of using VWAP It is the same as a moving average. In most periods, traders enter a bullish trade when the price is above the VWAP indicator. Likewise, they enter a Bearish trade when the price moves below VWAP indicator.
For example, in the chart below, we see that Microsoft shares have been in a strong bullish trend in the past few days. the Involved We are above VWAP Indicator meaning that Traders should maintain bullish positions As long as it is above the cursor.
Another alternative is where the trader decides to wait for the chart to continue falling and hits the VWAP. If it moves below VWAPAnd It is a signal to start a bearish trade. On the other hand, you can place a long position if it rejects a move below the VWAP indicator.
Risk Management
Moving averages and VWAP are not always perfect. Therefore, it is important to use several risk management strategies to protect your downside.
Some of the most popular risk management strategies include: Get a stop loss For all your trades, practice these strategies in the future Demo account Before moving to a real account, Reduce the amount of leverageand done proper position sizing.
Risk management will help you protect your account in case your trades are not successful.
summary
In this article, we took a look at the Two of the most popular trading strategies for people who struggle in the industry.
If you can master the concept of moving average, VWAP and risk management, you can be able to trade in all market conditions successfully.