As we begin 2022, traders and investors must set goals and map out strategies to achieve them. With this in mind, you must consider implementing some of the best trading strategies to boost your 2022 earnings. However, before we explore the trading strategies for 2022, you utilize these trading tips to boost your trading efforts.
Create a trading plan
Having a trading plan is critical to succeeding in your trading efforts. This allows you to determine factors such as profit targets, entry and exit points in a trade, and any factors influencing your trade before making any investment. It also simplifies your decision-making when opting to change your policy or cash out your overall investment.
Forex trading is a risky venture, so you must get into it with a clear mind. Be careful not to operate on emotions as you can lose all your money as a beginner. Yes, it might be tempting to push for higher returns, but it can turn into immense losses. And as such, you must know when to call it quits and make small losses, and know when to persist.
The Right Broker
Be careful when choosing a broker, as this can make or break your trading efforts. When selecting a forex broker, you must consider pricing structures, their expertise, and ease of use for the broker you collaborate with. Lucky for you, there are many outstanding forex brokers, and it’s just a matter of doing your research and selecting the one that fits your needs.
What are Trading Strategies
When trading in the financial markets, it’s the trader’s decision to buy or sell and the strategies are used to determine whether it will result in a profit or loss. Trading strategies help streamline the decision-making process by creating a set of rules best for making a trading decision. The vast number of trading techniques and methods can be overwhelming, and that is why it’s essential to utilize trading strategies.
Top Three Trading Strategies for 2022
1. Day trading
This is a trading strategy where traders buy and sell assets and securities within a single day, which means they exit the market by the end of the day. It’s most effective for active day traders.
Most day traders use intraday time frames when making trades, and it can range from minutes to hour charts. Some rely on economic or political news when making investment decisions. It’s most effective for new traders as they can make profitable trades multiple times within a day. While it may be a lucrative venture, be careful as it may result in immense losses if you don’t know what you are doing.
Some tips that can help you succeed in day trading include mapping out your trading marketing, timeframe, tools for entry and exit, and the amount you are willing to risk.
This is a stressful trading strategy as it requires you to act fast to make a successful trade, meaning that you’d have to stay in front of your laptop for an extended period. However, you’d reap the benefits as you’d be able to lock in several small profits.
As a trader, you aim to make the most of out of your scalping trades by covering the maps accurately to predict trading patterns and fluctuations. Stay calm and keen so as to respond promptly for scalp trading to be effective.
3. Swing trading
Forex traders who use this trading strategy buy and sell assets and securities by holding them for several days or weeks. Traders who practice this strategy are known as swing traders or trend-following traders. They use a chart to enter trades. Most traders hold their positions overnight to capture prominent price trends. You must be patient and disciplined enough to hold trades for extended periods as a swing trader. Successful trading opportunities can range between two to three currency pairs per week, but it’s more dependent on the market happenings. But the most popular technique for swing
4. Position trading
Traders buy and sell securities and hold them for weeks or months with position trading. These traders rely on a combination of daily, weekly and monthly charts and technical analysis when making an investment decision. They are mainly composed of active investors who are less concerned with short-term market fluctuation as their aim is to hold trades for extended periods. They are risk takers, and the upside of position trading will mostly result in a big winning trade.
5. Seasonal trading
This strategy involves the possibility of using a repeatable trend every year. Many financial markets have seasonal characteristics influenced by weather, government, economic changes, and corporate revenue. And seasonal traders use these patterns to give them a statistical edge when selecting their trade.
There are also seasonal investment strategies where people believe that the stock market is weak at a certain point in the year. For instance, people say, “sell in May and disappear.” The stock market experiences some weakness during summers ( May – October).
A study published in the Financial Analyst Journal found that between 1998 and 2001 the stock market gave out higher returns between November and April and low returns from May to October.
Always be keen on the trading strategies you opt to use in your trading process. You can test several and finally select the one that best fits your needs.
High-Risk Investment Warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment, and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial adviser if you have any doubts.