When starting out, it is a good idea to keep your trading strategy relatively simple and trust in what you know. We have already covered why it is important to choose a market with which you feel comfortable and in this section we’ll look at a few simple strategies to help get you started and trading with confidence. Once you have mastered these, you can graduate on to more advanced trading techniques.
Our guide to Spread Betting strategies can help you refine your approach to the markets and build upon your current trading strategy.
The power of analysis
Analysis forms the bedrock of any intelligent trading plan and will help you identify value trades that show the greatest potential. Every trading decision you make should have a firm rationale behind it based on the insights and information you have gained as part of your market analysis. Generally research falls into two main categories, Technical and Fundamental analysis.
Let’s start with Technical analysis first, as this can offer powerful market insights into trends, sentiment and market momentum which could help you identify key trading opportunities.
Technical analysts rely on charts and indicators to identify market trends which could point to future market movements. Because markets often react in similar ways to a variety of events, technical traders analyse past market performance for clues as to how a market might perform under similar conditions in the future.
Our powerful charting tools and indicators can help you track market movement and identify trends as they develop, to better help you identify trading opportunities.
Fundamental analysts on the other hand rely more on real-world events and analysis on conditions which could impact price movements within a market. For example, fundamental analysts will look at events like company earnings reports, economic data releases, central bank decisions and factors influencing supply and demand to make informed trading decisions.
Fundamental analysts look at the “big picture” to get a feel for a wide range of different factors which could drive market movement. This approach allows them to isolate and analyse the biggest events and interpret how these might impact the market.
Using a combination of both Technical and Fundamental analysis will help you subject your trading ideas to rigorous testing and give you confidence in your broader trading strategy.
Tracking your progress
Many successful traders approach their trading as a business in a serious, methodical way. One way to do this is to start a trading journal where you record all of the details of your trades including key information such as:
- Rationale for opening trade based on research
- Stake size and trade direction
- Original profit target/loss level
- Duration of trade
- Actual Profit/Loss incurred
The reasoning behind this approach is simple, by tracking your trading history you will have a reference point to your most successful trades and can gain insights into which trade rationale worked, which market trends were prevalent at the time of your trade and whether or not you remained disciplined in sticking to your profit target.
This information is highly valuable as you build and refine your trading strategy and can help you to identify similar successful trading ideas in the future.
The trend is your friend
There is a saying among traders that the “trend is your friend” and this is particularly true if you are new to the markets.
Trading with an established or developing trend is a smart idea when starting out as you can learn more about market momentum, how to identify market entry and exit points and how to use risk management tools.
Trading with a trend is sometimes called “Position trading” and is a medium-term strategy which relies on charting and technical analysis to identify market opportunities.
AT ETX our powerful charts give you a range of tools like indicators, trendlines and accurate drawing tools to that you can track price fluctuations.
Look for an entry point once a trend has been firmly established and make sure that you review charts across a number of timeframes to get a good feel for current market sentiment.