Most Profitable Trading Strategies Professional Traders Use

Are you looking to try your luck at the stock market? Entering the world of trading can be quite daunting, to say the least. Between market trends, complex financial instruments, price fluctuations, and endless jargon, there are several aspects to consider if you hope to successfully navigate the sphere of speculation. 

It all comes down to minimizing risks, limiting losses, and maximizing potential returns. In that spirit, this beginner-friendly guide will highlight the most profitable active trading strategies professionals use to turn a consistently high profit. Get ready to become a seasoned investor!

Day Trading

As the name suggests, day trading is a method that consists of buying and selling securities throughout the course of a single day. Basically, traders seek to capitalize on a given stock’s price movements, such as company announcements, reaction to global events, local news, and such. This is a short-term and potentially very lucrative method for turning a profit. While day trading is usually practiced by experienced financiers, digital trading has opened the strategy to beginners.

Scalping

Scalping is one of the most common strategies among novice stock market investors. It’s an ultra-short term tactic that involves exploiting price gaps and selling trades as soon as they become profitable. Generally speaking, scalpers prefer liquid, predictable markets that don’t hold a high degree of risk. Given the fast pace of this method, the returns are rather minimal (a few cents per trade), but investing in quantity can be a driving force.

Swing Trading

Contrary to day trade, swing traders can hold positions for longer periods. In essence, this strategy rests upon taking advantage of overnight changes. Swing traders capitalize on closing trends when there’s price volatility. Profits can be enormous. Speaking of which, consulting a specialized review of the Single-Stock retirement plan will acquaint you with other high-yield, long-term trading strategies for maximum gains. As a novice, it’s important to conduct research and diversify your trades as much as possible.

Position Trading

While on the topic of long-term tactics, position trading is another widely-employed profitable strategy. Using graphs, charts, and aggregate data, position traders try to establish the direction in which a security is headed. Rather than bet on immediate price fluctuations, they examine when a trend is at its highest and jump on the wave to turn a profit. While position trading requires skill, patience, and isn’t the best-suited method in volatile markets, the returns can be substantial.

Breakout

Being familiar with the concepts of support and resistance will be of great help when leveraging the breakout strategy. In simple terms, a breakout occurs when the value of a traded asset surpasses a never-exceeded threshold (resistance level), namely when that value starts to rise. For instance, if a security or stock has never traded for more than $50 dollars and suddenly jumps to $52, the odds of making a profitable trade are quite high.

Reversal

Also known as “pull back trending,” reversal trading takes the opposite approach. As counterintuitive as it sounds, when a resistance level has been exceeded, traders will bet against the trend. Just like the breakout strategy, this one isn’t dependent on price fluctuations but rather on market trends. Needless to say, this requires a great deal of in-depth knowledge and foresightedness and can be very risky for the uninitiated.

Foreign Exchange

Trading in currencies has been a trend for quite some time. Forex traders purchase currencies (euros, dollars, yens, swiss francs, etc.) and take advantage of price fluctuations over a 24-hour period.

This can be particularly challenging, seeing as profits must be accumulated in a short period of time. No matter which currency you’re looking to invest in, some advanced research will point you towards plenty of resourceful guides to help you turn a good profit.

Commodity Trading

Last but not least, commodities such as gold, copper, crude oil, or soybeans can also be traded, bought, and sold at a profit with futures contracts. The value of these raw materials varies greatly from one year to the next, dictated by factors such as the weather, supply and demand, the state of the economy, and more.

All in all, professional traders use a wide array of trading strategies to make profits. No matter the nature of the asset in question, whether it’s company stocks, securities, currencies, or else, it takes a high level of technical knowledge to navigate financial instruments, know when to buy, when to sell, and when to pocket the money. In any case, conducting research, using mock trading apps, and taking help from an experienced trader will maximize your chances of generating a good income.