A trading strategy is a plan of action that all traders use to implement their various buy and sell orders in the financial markets.
Defining your trading strategy is one of the most important decisions in a trader’s life!
Learn what a trading strategy is, how to develop one, and the most popular trading strategies in the financial markets.
What is a trading strategy?
A trading strategy is a method that we define before trading on the financial markets and that we systematically follow when trading on the stock market , on raw materials or in cryptocurrencies .
Each trader has his own trading strategy , which he has taken the time to define according to certain very specific rules and criteria such as:
A trading strategy must be based on objective rules and criteria and must be respected in all cases in order to limit risks . If necessary, if this proves to be ineffective, it is important to take the time to evolve and adjust your trading strategy as market conditions change or improve.
In addition, your trading strategy may need to evolve when your objectives change, your capital evolves or you gain maturity and trading experience.
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A trading strategy is essential for all traders. No matter your level and the capital you have, when you start trading, you must have a trading strategy . Trading requires knowledge, skills and a certain amount of experience in the financial markets so it is important to put all the chances on your side to succeed .
To your trading preferences, knowledge and skills.
There is as much strategy as there is trading. You should not copy the trading strategy of your best friend or someone on social networks, simply because it will not match your trading profile. With every moment of panic or loss, you will question your friend’s strategy and cost yourself time and money.
Why is it important to have a trading strategy?
In trading , it is essential to have a trading strategy adapted to your profile, for several reasons. The main use of a trading strategy is to have a basis on which to rely in order to limit the risks of losing all of your capital. Without a trading strategy, we can quickly make bad decisions and let our emotions take over.
A trading strategy is a course of action that is important to follow on all of your trades, without exception!
Taking the time to define your trading strategy will help you determine your buy and sell prices and when you should cut your positions, whether they are winning or losing.
Let’s take the example of a trader who opens a buy position on BTC , because he has spotted an opportunity thanks to his technical analysis . This trader agrees to lose the equivalent of 2% of his capital before his position is automatically closed.
By not following his strategy, the trader can find himself losing more than 2% of his capital on his position and facing much greater losses than expected. This trader will keep his position on BTC despite the significant drop in price, because his feelings have taken over . But ultimately, he finds himself having to close his position at -10% . Whereas he could have respected his strategy and agreed to lose “only” 2% of his capital.