Before we dive in, keep in mind that there are more than a handful of ways to make money in the markets, there’s no “one single” strategy that all successful traders and investors use. Before getting into some of the common profitable ones, it’s important to know that.....
A strategy only works if the trader is implementing that strategy consistently and without any hesitation. Even if that strategy may be going through a draw down (say a string of losses). Because no strategy is perfect and there will be losses. The key is to implement a strategy that is profitable over a series of trades.
It’s also worth noting that a profitable strategy involves more than just one or two components, what I’ll provide are various pieces. However, it’s up to you and you only to put those pieces together. Because no one knows your puzzle except for you, so with that in mind. Here are a few…..
- The Cup and Handle Breakout
- Trend Following
- Momentum Breakouts
- More Juicy Strategies
- Where to implement these strategies
The Cup and Handle Breakout - The story goes like this, you get a load of buyers pushing price up. Then there is a reaction from sellers/old buyers taking their profits. That can be due to maybe a round number, similar reaction in the past, or any other reason. This creates a resistance level (beginning of the cup), then we get the first test from the buyers at the resistance level. This completes the “cup” and we get a reaction from the sellers.
This is where buyers waiting on the side are watching to see whether the same sellers will return (or new sellers). The reaction this time is far weaker and in fact, the test to the resistance level comes much sooner. This completes the “handle” portion. Some of the sideline may be setting up orders either on the breakout side or on the re-test.
Trend Following - This one has been around for a long long time and is used by many hedge funds and financial firms. You’ve probably heard of it already, but just in case. This one goes by the key principle which is the definition of a trend, which is higher highs / higher lows (uptrend) and lower highs / lower lows (downtrend).
Picture it as riding the wave like a surfer would, or catching the train. The idea here is to wait for some big players to start the initial move, then look for early clues that the move could continue and join.
It’s a simple and easy to read and follow concept, especially when implemented on the higher time frames. Trend can happen at almost any time and can start from say ranges or periods of accumulating orders. These can offer some low risk to high reward setups and are really what’s behind the slogan of “let your profits run”.
Momentum Breakouts - You could say that this occurs after the “cup and handle” breakout above the resistance. This could also occur after a range or really any other reason.
These can come during news events, earnings releases, or any other sort of surprise or major events. This essentially looks at catching the initial move and playing to the volatility of the move.
This can set up for potentially higher rewards in a short period of time, but also opens up to high risk at the same time. Timing here is very important and the trades are usually placed on the lower time frames. Scalpers or very short term traders use this.
Other Strategies - Here are other Profitable Strategies you can look into which take advantage of various market conditions.
- Simple Options Strategies for Beginners with Full Support
- The CrinvestFX Strategy
- Road to Successful Investing for under $50
Remember
These strategies are chart based, meaning that they fall under technical analysis and only make up a portion of a solid strategy. Other components include looking at the fundamentals (the why behind a stock or any other asset’s movement, or potential move). As well as assessing the amount of risk you are willing to accept and allocate per trade.
It’s also important to back test these strategies either on a simulated account or a back testing software before going live with these.
It’s funny because these strategies are not new, in fact. They are one of the oldest strategies around, yet they still work (when used appropriately with other components). Why is that? Well mainly because they are based off of market / crowd behavior. The markets are still comprised of people for the most part, and because of that. There will be instances where similar behavior will present themselves from time to time.
Hope this helps!
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