Top 10 Most Popular Trading Strategies (2024)

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February 23, 2023Upd on June 23, 2023

Top 10 Most Popular Trading Strategies (1)

Top 10 Most Popular Trading Strategies (2)

If you’re someone who wants to become a trader, you know very well that it’s going to be complex, challenging, and risky.

To succeed in this incredibly competitive environment, you will need to develop a set of tools and strategies that you can add to your trading arsenal.

In this article, you’re going to learn about the top 10 most popular trading strategies employed by professional traders in all financial markets, from stocks and forex to cryptocurrencies.

Trading Strategy #1 – Buy and Hold

As the name might suggest, buy and hold is a strategy you employ every time you buy an asset with the intention of holding that asset for a certain period of time regardless of its price fluctuations.

This is done with the expectation for long-term gains, and it’s a strategy employed over several years (and sometimes, even decades.)

This is one of the most popular trading strategies for people investing in stocks or other assets that have a history of slow but steady gains (such as mutual funds or index funds.)

If you’re a buy and hold investor, this means that you believe the likelihood for long-term potential gains ultimately outweighs the risk of short-term market volatility. There are many pros and cons to the passive buy and hold strategy.

In the cryptocurrency world, this strategy is often known as HODLing. HODLing is an investment strategy in which investors buy a crypto and hold it for a long time. The term “HODL” was coined in a Bitcoin forum, where a user misspelled the word “hold.”

Since then, the term has basically become synonymous with the strategy of holding onto cryptocurrencies with the expectation that their price will rise in the long-term.

Trading Strategy #2 – Value Investing

Value investing has been popularized by legendary investor Warren Buffet who is considered by many to be the world’s greatest value investor.

The strategy involves buying a stock or an asset that is undervalued by the market, with the belief that their genuine value will be recognized as market conditions change.

Because this strategy often involves finding companies with very strong fundamentals and a competitive advantage, it has become the go-to for investors who want to invest yet keep a certain margin of safety.

Trading Strategy #3 – Swing Trading

Swing trading is a popular trading strategy that involves aiming for quick profits resulting from short-term price movements.

While some swing traders open their positions and hold them open for a few days, others may go as high as a few weeks. Usually, these types of traders look for assets that are expected to move up in the short-term, and then they sell them once they hit their specific profit target.

If executed correctly, swing trading can be an effective way to trade, though it requires a good deal of trial and error (and not to mention, a lot of discipline.)

Trading Strategy #4 – Momentum Trading

Momentum trading is all about finding stocks or assets that are already on the way up, usually meaning they’re either increasing in prices or they’re achieving a significantly higher trading volume than usual.

If you’re a momentum trader, you’re typically focused on buying stocks based on their upward momentum and then selling them once that momentum begins to reverse.

Momentum trading has long been based on the idea that market trends continue for a while before they reverse, and it’s one strategy you should definitely have in your arsenal whether you’re a beginner or a pro trader.

Trading Strategy #5 – Scalping

Top 10 Most Popular Trading Strategies (3)

Scalping is a trading method that involves quickly buying and selling assets, often within the span of a few minutes or even seconds.

With the idea being maximizing the profits on each trade and taking advantage of bid-ask spreads and small discrepancies in the market, this has turned into a very high-frequency strategy utilized by a small portion of pro investors.

If you want to make scalping work for you, just know that you need to be fast, execute boldly, act on tight spreads, and most importantly, have pretty good reflexes.

Trading Strategy #6 – Day Trading

The day trading strategy has been popularized in the cryptocurrency community due to its pre-conceived volatility.

The strategy involves opening buy and sell positions on a stock or another asset usually within the same trading day, and often using technical analysis to try to predict short-term price movements. Although day traders are interested in making small gains on each trade, some go as far as using leverage to amplify their returns.

Although sometimes highly profitable, the trading strategy also carries many risks so it’s not the best strategy to employ if you’re a beginner who hasn’t learned to manage risk. In the crypto space, many traders prefer day trading because there are many cryptocurrency exchanges that make it easy and accessible to trade cryptocurrencies.

Trading Strategy #7 – Positions Trading

Position trading is a strategy in which traders or investors hold a specific position for weeks or months and largely base their decisions on macroeconomic trends and fundamental analysis.

Position traders are often interested in long-term trends, and they aim to profit off these larger price movements over an extended period of time. Although it’s definitely less stressful and high adrenaline than day trading or swing trading, it also requires an enormous amount of patience and discipline.

Trading Strategy #8 – Arbitrage

Doing arbitrage means buying and selling certain assets and securities and trying to take advantage of the price discrepancies between them.

In one example, an arbitrage trader (also known as an arbitrageur) might buy a crypto coin on one exchange where it’s undervalued and then sell it on another exchange where it’s overvalued, profiting from the difference.

Although it carries the potential for profit, it requires very quick thinking, access to multiple platforms in which the asset can be bought and sold, and a deep understanding of the market dynamics.

Trading Strategy #9 – Options Trading

Options trading is a type of trading in which you may bet on the future direction of the price of an asset with the help of something called an options contract.

If you’re an options trader, you might buy a “call” option if you believe that the asset will rise in price, or a “put” option if they believe a stock might tank in price.

Options are largely used for speculation and hedging, allowing a trader to profit off the market movements or even protect them against losses. However, it also a high level of risk similar to other speculative modes of investing.

Trading Strategy #10 – Market Making

Market making is a strategy used by traders who want to provide liquidity to the market by engaging in traders.

Market makers buy at something called a “bid” price. This is the highest price a buyer is willing to pay for a specific crypto or another asset. Then, they sell that asset at an “ask” price. This, as the name suggests, is the lowest price a seller is willing to accept for their crypto.

By providing both buy and sell orders, a market maker can basically narrow down the spread between bids and asks. This improves the market efficiency significantly and makes it very easy for other traders to buy and sell crypto.

In the crypto world, market making can be a profitable strategy because it allows traders to capture the various differences between bid and ask prices. This difference is known as the spread.

You should keep in mind that market making also assumes a high degree of risks because you, the trader or investor, must hold an inventory of specific cryptos in order for you to make trades.

Top 10 Most Popular Trading Strategies (4)

Which crypto trading strategy is right for you?

Because the crypto market is, by nature, highly volatile, it’s important that you’re always aware of the risks involved and have realistic expectations about the outcome of the strategy you’re going to employ.

It’s absolutely crucial to stay up to date with all the latest news and developments in the crypto space. If you can gather enough data and use the right strategy to trade or invest your funds, you will likely be much more successful than those who don’t.

Ultimately, successful crypto trading (or trading altogether) requires a combination of knowledge, skill, and discipline. By keeping a cool head, doing your research, and being patient, you can potentially achieve significant gains in this new ever evolving market.

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Top 10 Most Popular Trading Strategies (2024)

FAQs

What is the 3 5 7 rule in trading? ›

What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

Which trading strategy has the highest success rate? ›

If you're looking for a high win rate trading strategy, the Triple RSI Trading System is definitely worth checking out. This system uses three different Relative Strength Index (RSI) indicators to identify potential buy and sell signals in the market.

Which trading strategy is most accurate? ›

Trend trading strategy. This strategy describes when a trader uses technical analysis to define a trend, and only enters trades in the direction of the pre-determined trend. The above is a famous trading motto and one of the most accurate in the markets.

Is there a 100% trading strategy? ›

A 100 percent trading strategy is an approach that involves investing all of your capital into a single trade. While this can be risky, it can also lead to significant profits if executed correctly.

What strategy do most traders use? ›

Top 10 Most Popular Trading Strategies
  • Trading Strategy #1 – Buy and Hold. ...
  • Trading Strategy #2 – Value Investing. ...
  • Trading Strategy #3 – Swing Trading. ...
  • Trading Strategy #4 – Momentum Trading. ...
  • Trading Strategy #5 – Scalping. ...
  • Trading Strategy #6 – Day Trading. ...
  • Trading Strategy #7 – Positions Trading.
Feb 23, 2023

What is No 1 rule of trading? ›

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

What is 90% rule in trading? ›

The 90 rule in Forex is a commonly cited statistic that states that 90% of Forex traders lose 90% of their money in the first 90 days. This is a sobering statistic, but it is important to understand why it is true and how to avoid falling into the same trap.

What is the 80% rule in trading? ›

The Rule. If, after trading outside the Value Area, we then trade back into the Value Area (VA) and the market closes inside the VA in one of the 30 minute brackets then there is an 80% chance that the market will trade back to the other side of the VA.

What is the simplest most profitable trading strategy? ›

One of the simplest and most widely known fundamental strategies is value investing. This strategy involves identifying undervalued assets based on their intrinsic value and holding onto them until the market recognizes their true worth.

What is the most profitable trading style? ›

Conclusion. The most profitable form of trading varies based on individual preferences, risk tolerance, and market conditions. Day trading offers rapid profits but demands quick decision-making, while position trading requires patience for long-term gains.

What is the simplest trading strategy ever? ›

A simple method which doesn't require any analysis or indicator: Open a trade in the direction of the daily candle any time during the day in your own time zone. Don't put a limit. Put a stoploss equal to the length of the candle.

What indicator do most traders use? ›

10 most popular indicators for trading
  • Moving Average Convergence Divergence (MACD) ...
  • Stochastic Oscillator. ...
  • Bollinger Bands. ...
  • Relative Strength Index (RSI) ...
  • Fibonacci Retracement. ...
  • Standard Deviation. ...
  • Ichimoku Cloud. ...
  • Client Sentiment. IG client sentiment provides insights into the positioning of traders in a specific market.

What is the most powerful indicator in trading? ›

The best technical indicators for forex traders are the RSI, MACD, and Bollinger Bands. Most FX traders use these as their primary indicators. There are other indicators available in the market, but these three tend to be the most commonly used for predicting future price points.

How to get 50 pips per day? ›

To implement the 50 pips a day strategy, traders usually set a profit target of 50 pips and a stop loss to limit potential losses. They carefully monitor the market and open positions when they believe there is a high probability of achieving the target profit.

What are the 4 types of trading strategies? ›

What is a trading style?
Trading styleTimeframeCommon holding period
1. Position tradingLong termMonths to years
2. Swing tradingShort to medium termDays to weeks
3. Day tradingShort termIntraday only
4. Scalp tradingVery short termSeconds to minutes

What's the best trading strategy for beginners? ›

Moving averages are the perfect beginner trading strategy in my opinion. They clearly visualize the trend and provide straightforward trade signals. I would recommend starting with the 20 and 50-day SMAs and then optimize from there once you gain more experience. Always use stops to manage risk.

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