Best strategy for long term trading
In the modern world, the opportunity to make money on the Internet is becoming more and more important. There are many advantages to such work: you do not need to spend several hours a day on the road to the office, in traffic jams. You can work at a convenient time and place. But, even if you are not yet ready to quit your usual job, then there is an opportunity for you to make money on investments - it will just be better for you to choose a long-term trading strategy.
But, first, let's look at the very concept of "trading strategy".
What is a trading strategy?
A trading strategy is something without which it is impossible to work on the exchange. Without a trading strategy, trading turns into a game of chance for adrenaline, not profit. Therefore, the importance of a trading strategy cannot be overstated.
Trading Strategy is a complete trader's guide. The goal of the strategy is to provide profit on the exchange.
A trading strategy is usually based on:
- Rules for market analysis (fundamental and / or technical analysis) and search for opportunities;
- Rules for entering a position with a favorable forecast;
- Rules for holding a position;
- Rules for exiting a position;
- Risk management;
- Rules for correcting bugs.
Any trading strategy must be consistent with the trader's personality and discipline. How he analyzes the information coming from the market and assesses its nature, how he creates a forecast based on actual data. Are you inclined to hold profits and cut losses. A ready-made trading strategy is like a clear action plan that applies to both manual and automated trading.
What are the trading strategies?
Strategies are divided into long-term, medium-term and short-term strategies:
- Long term strategies can use long time frames, from several weeks to several years.
- Medium-term strategies are usually called those that rely on price changes over several days or weeks.
- Short-term ones involve price changes from several hours to two or three days.
- There is a separate concept of scalping. This is the name for super-short-term strategies, where the account goes on for minutes and tens of minutes, and profits and losses are always small.
How much time are you willing to set aside for trading?
This is the first and main question to which you need to give yourself an honest answer. Your time is a critical resource and must be properly managed:
- Short-term trading strategies. They require an almost constant presence in front of the trading terminal window due to the need for continuous monitoring of the market situation. Good conditions for opening a trade can be formed within a few minutes, and you need to react to them immediately. If you have chosen to work in the foreign exchange market as your main direction and are able to devote almost all of your day to trading, then this option may well suit you.
- Medium-term trading strategies. The best option for most traders who are not ready to leave their main job and are at the stage of assessing their capabilities and prospects in this field. Working within the framework of a medium-term trading strategy allows you to successfully combine work or study, and also does not limit your life in general to the framework of the trading day. For successful work, it is enough to set aside a few minutes for market analysis in the morning, at lunchtime and in the evening. This tactic is followed by many successful traders who prefer to devote themselves and their time to much more enjoyable pursuits.
- Long-term trading strategies. If you are extremely busy at work or you have your own business, then these types of trading strategies can be an excellent solution. For example, you consider trading as an excellent tool for increasing or protecting your capital from inflation and other negative factors. In this case, you have enough time to make trading decisions; you can weigh all the options yourself or use the recommendations of professional traders.
So, you have decided for yourself that long-term investments are more convenient for you. Let's take a look at the best long term trading strategies.
Markets for long-term trading
Financial markets redistribute capital flows between different sectors, regions, countries, and participants. Each has its own characteristics and performs its own functions. There are different classifications of markets, the most acceptable for traders is the following one - by the type of instruments:
- Currency market - Forex, provides exchange operations between national currencies;
- Stock market - securities market - shares of AO, units of investment funds, provides inflow of investments for issuers, corporate rights for investors in proportion to participation;
- Derivatives market - market of derivative financial instruments (derivatives) - futures and options, used for hedging risks on commodity and stock markets and speculative operations;
- Debt market - a market of debt securities - bonds, treasury bills, provides financing on a long-term basis for issuers - corporations, the state.
The choice of market depends on many components. There are factors that depend on the trader's experience and trading account size. There are factors beyond trader's control such as liquidity of markets and instruments, quantity of available instruments, trading conditions - broker's and exchange's commission, trading platforms, complexity of registration and others.
The capital market, where long-term securities are traded, with maturities of more than one year - treasury bonds or bills of exchange for 1 year, 10 years, 30 years, or corporate bonds. The issuer of debt securities is the borrower, the buyer is the lender. Treasury bonds are the most appropriate instrument to cover the state budget deficit and long-term investment projects. The yield on bonds depends on the reliability of the issuer. The lower the degree of risk, the lower the yield. During economic crises, investors leave risky assets, preferring instruments with low, but guaranteed returns.
It is not the largest in terms of trading volume - the daily volume of the stock market on the 10 largest exchanges in the world is more than USD 5 trillion - but it performs an equally important function - business financing. Through an IPO (initial public offering), companies go public. Share - a document that testifies to the shareholder's participation in the capital of the company and gives him the rights - the right to vote - by voting at a meeting of shareholders when making decisions of a managerial nature; the right to receive dividends as part of the distributed profit. In the secondary market, shares are bought and sold at market prices, influenced by supply and demand, based on the current market situation and the development prospects of the company itself. The existence of functional features of the markets has led to the development of a variety of financial instruments.
With online trading there is no actual purchase of assets. By investing in a company's shares through an online brokerage platform, you open a CFD contract which involves speculating on the price of the asset without having any ownership rights to the asset itself.
Forex currency market
Novice traders often choose online Forex trading. There are a lot of reasons for that:
- Firstly, numerous dealer centers and Forex brokers widely advertise their activity, have a convenient service of account registration, and free access to the trading platform.
- Secondly, traders are attracted by the low starting capital. Many companies offer an opportunity to open an account with 100 dollars, cent accounts are opened with symbolic 10 dollars, sometimes even with 1 dollar.
- Thirdly, the demo-version is a definite plus for beginners, allowing to practice without losing your own money.
- Fourthly, leverage. Forex brokers offer big leverage - 500:1 or 1000:1. Of course, this greatly increases the size of the potential profit, but also greatly increases the risks and "helps" inexperienced traders to quickly part with their own deposit by margin-call.
- Fifthly, many instruments are offered by online platforms like different indicators for market analysis and derivatives for trading.
Forex is considered to be the most liquid and volatile market. The share of individual speculators in daily turnover is about 5%. The major role at Forex is played by banks and funds. The lack of transparent competition makes this market rather closed, so experienced speculators do not consider Forex as simple as it may seem.
Currency market is also the largest in terms of trading volume. The daily turnover in 2019 exceeded USD 6.6 trillion. Its main function is to provide international settlements, hedge currency risks, and form market rates of national currencies.
How To Invest In The Philippines Without Buying?
There is a wonderful opportunity to make money on investments without buying real assets, for this there is a CFD.
A CFD allows you to trade the underlying asset even if you don't own it.
CFDs are classified as an OTC financial derivative that allows you to profit from changes in the prices of various financial assets, including index futures, trading futures, cryptocurrencies, stocks and exchange securities.
The CFD price is the price of an asset (stock, index, or futures). If the asset price increases, so will the CFD price. An important difference is the lack of exchange fees and other disadvantages of stock trading on the exchange. CFDs allow you to take advantage of leverage. CFDs have gained immense popularity over the past few years.
You can make profit by buying CFDs (if you expect their price to rise) or selling them (if you are sure of the opposite market trend). Your profit will be determined as the difference between the purchase and sale of CFDs.
The best long term trading strategy
There are a huge number of long-term trading strategies. Everyone should choose the right one for themselves, for their character, preferences in terms of trading rates, time costs, and so on.
There are many profitable strategies that are based on the logic of the market, and therefore will always work. Objectively, there is no better one among them, but there is one that is right for you.
The proven and most correct way to develop a trader will be to choose a strategy from open sources, study it and refine it and modify its rules for yourself, if necessary.
How to start making money on investments?
When choosing an online trading platform, it is important to consider factors such as reliability (having a brokerage license), ease of use, price per transaction and the payment methods used. Once you have found an online trading platform, you will need to create an account.
Registration on the online platform
Registration will take just a few minutes:
- Enter your name and email address in the appropriate fields;
- A confirmation email will be sent to you;
- Follow the link provided in the letter, you will be returned to the platform;
- Registration is over.
Even though a long-term trading strategy is more convenient for you, try short-term strategies first to understand how the market works, and how to use the instruments. It is convenient to do it on a demo account.
A demo account is a demo version of a real account, with which you can practice trading without the risk of losing money. The system will automatically credit your demo account with a certain amount of fictitious money for test trading.
How to fund an account?
To open a real brokerage account, you will need a small amount, usually the minimum deposit set by the broker is only a few dollars. Click "deposit" and the system will tell you what to do next:
- Choose a convenient payment method.
- You can choose to pay by credit card, bank transfer or e-wallet.
Everyone can invest! Try it and you will succeed!