When analyzing the market a trader should have a good trading tactics. Make decisions on whether he wants to trade up or trade down. Aside from that he should also have a specific amount of money in mind that he wants to invest. A trader should also choose between buying and selling a contract.
There’s also the most complicated part of margin trading which is determining the precise moment to enter or exit a market. Before deciding to enter a market you must first study the combination of technical factors, money management and order type.
The process of determining the moment for entry or exit should be made on short term hence it’s not measured by weeks and months, but by hours and even minutes. But with all cases the same technical tools are used. Major principles of such analysis are listed below.
1. Tactics based on Price Breaks.
Three ways of trading with the help of price breaks:
– Closing the position in advance
– Opening a position when the break is in progress
– Waiting for a rollback after break
Each approach has its own advantages and disadvantages; therefore sometimes a combined approach is used. When working with several lots, a trader can open one position at each of the three stages. Besides, a trader might open a small position before the estimated break, and then open additional positions at an insignificant price decline during correction that follows the break.
2. Trend line Cross
This signal allows a trader to enter the market or to leave it soon enough, especially when a significant and reliable trend line had been crossed. Of course, other technical factors should also be taken into consideration.
3. Support/Resistance Levels
A break of the support level can be a signal to open a long position. The stop loss signal should be place below the nearest support level or directly below the break level, which in this case will act as a supporting function.
Price declines to the support level during an uptrend and advance to the resistance level during a downtrend this can be use to open new positions and add lots to already opened profitable ones. When setting stop loss signal, it is important to take support/resistance levels into account.
Price gaps that are formed on bar charts can be use to choose the proper moment to open or close positions. The stop loss can be place below the gap. During a downtrend a short position should be opened when prices reach the lower border of the gap. The stop signal must be place above the gap.
Averaging is a trading strategy employed when a trader made a mistake of opening a trade and the price has moved against him/her. In this case a trader performs a new operation of the same type but with much profitable price. However, averaging has a drawback; no one knows beforehand what price the market will go. And the averaging demands an investment twice the amount of the money invested before.
Another trading strategy, Scalping, used by traders working with very short terms probably one minute to five minutes. If the price goes up the trader buys, in case of the reversal he/she sells. As a rule, the trader makes about 15-20 deals a day.
The drawback of this tactic is that the trader should always watch the market and cannot divert his/her attention from the charts.
We have described the most popular and well-known trading tactics, but the choice is always up to you. It may be wise for you to try different strategies and see which works for you.