However, like many things in life there is much more than that. The alpha generation is a strategy where the traders are trying to gain an edge by data mining and machine learning methods. An alfa is every trading strategy resulting from this generation which has reasonable expected return.

The carry trade is one of the most popular FX trading strategies. It is based on gaining from the interest rate differentials between two currencies. In the carry trade strategy implies that high interest rate currencies should lose value versus low interest rate currencies. In the basic carry trade strategy, the trader sells short forwards on currencies that are quoted at a premium the forward FX rate exceeds the spot FX rate and vice-versa.

This strategy is not a risk-free arbitrage, because there is a chance that the FX rate suddenly changes, and the trader is exposed to exchange rate risk. The Forex triangular arbitrage is a trading strategy based on opening positions in 3 currency pairs. For example, EURUSD, USDJPY, and EURJPY. The system is relying on catching discrepancies arbitrage opportunities occurring by opposing positions where the rate of one currency pair diverges from the cross rate between, the other two.

For example, if the result of exchanging EUR to USD is different than the result from exchanging EUR to JPY and JPY to USD there is an arbitrage opportunity. Roll yields occur from rebalancing futures positions. When a futures contract is about to expire, it needs to be replaced with another futures contract with longer expiration. If the price of the front futures contract is higher than the following month futures price, there is backwardation.

If it is the opposite — the price of the front futures contract is lower than the price of the following month futures price, then there is contango. In commodity futures markets the near-month contracts react to supply and demand changed quicker than further-month contracts most of the time.

As a result, a trader can implement a trading strategy, called calendar spread which aims to gain from the difference. There are two types of calendar spread. The bull futures spread is based on buying a near-month futures contract and selling the further-month contract.

The bear futures spread is the opposite — you sell the near-month contract and buy the further-month one. The convertible arbitrage strategy is based on convertible bonds. A convertible bond is a security with hybrid properties that gives the investor the option to convert the bond from a fixed-income instrument to equity. This transformation happens according to a predefined conversion ratio of bonds to stocks when the stock price reaches a certain level called conversion price. The convertible arbitrage strategy is based on buying a convertible bond and selling short the underlying stock.

The sentiment analysis strategy is based on extracting trading signals using machine learning algorithms applied to social media data. The process starts with the collection of social media posts most frequently tweets that are containing at least one keyword listed in vocabulary over a predefined time frame.

The second step is cleaning the data. After this is completed the data is further processed by the machine learning algorithms aiming to extract models that can be used to predict the price movements according to the public sentiment.

We hope that this list of 21 most popular trading strategies was useful for you! Sources: 1 Trading Strategies, , Kakushadze, Zura et al.

No part of the content of this website constitutes a recommendation to apply any investment strategies presented or implied in any of the site content. No part of this website or its content should be considered any type of investment or other advice related to your personal circumstances. You must take independent financial advice from a qualified professional when making any type of financial decision which may or may not be directly related to information found on this website.

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Diyan Doychev - May 19, Contents hide. Learn more about algorithmic trading, quantitative analysis and automated systems directly in your inbox.

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What is Ripple? What is Litecoin? What is Bitcoin Cash? Is Luno Safe? Best Brokers. Forex No Deposit Bonus. FSCA Regulated Forex Brokers. One of the most powerful means of winning a trade is to make use of and apply successful Forex trading strategies for South African Traders. In this guide, we will show you step by step which are the best forex trading strategies and tips to apply for your style of trading. The first strategy to keep in mind is that following a single system all the time is not enough for a successful trade.

Each trader should know how to face all market conditions, however, is not so easy, and requires an in-depth study and understanding of economics. Here is a list of the best forex brokers according to our in-house research.

Forex is a combination of foreign currency and exchange. Foreign exchange is the process of changing one currency into another currency for a vast variety of reasons, including:. Forex, or foreign exchange, is explained as a network of buyers and sellers, who transfer currency between each other at an agreed price. By doing this individuals, companies and central banks convert one currency into another. While a lot of foreign exchange is done for practical purposes, the vast majority of currency conversion is undertaken with the aim of earning a profit.

Learning how to trade Forex can be a complicated process for beginners. Most people have a dream of getting rich overnight, which may turn out exactly as unrealistic as it sounds. The world of Forex trading can be overwhelming, especially when you are new to the game, and don't know or understand the rules as yet. There are a lot of figures in regards to how many traders successfully make money and how many traders occur a loss of money.

First, you will need:. Decoding the most common terms used in forex will speed up traders' understanding of the world of currencies:. Technical Indicators in Forex Trading Strategies Technical indicators are the calculations based on the price and volume of security and are used both to confirm the trend and the quality of chart patterns and to help traders determine the buy and sell signals.

In Forex technical analysis a chart is a graphical depiction of price movements over a certain time frame. Read Review. Perhaps the major part of Forex trading strategies is based on the main types of Forex market analysis used to understand the market movement. What is Forex technical analysis? Forex technical analysis is the study of market action by the primary use of charts for the purpose of forecasting future price trends.

Forex traders can develop strategies based on various technical analysis tools including:. Forex traders can conduct a Multiple Time Frame Analysis by the use of different timeframe charts.

Technical analysis strategies are a crucial method of evaluating assets based on the analysis and statistics of past market action, past prices, and past volume. All the technical analysis tools that are used have a single purpose and that is to help identify the market trends.

What is a Forex Trend? Much like any other trend for example in fashion- it is the direction in which the market moves. More precisely and good to know, the foreign exchange market does not move in a straight line, but more in successive waves with clear peaks or highs and lows.

There are three types of trends that the market can move in:. During any type of trend, traders should develop a specific strategy. The buying strategy is preferable when the market goes up and equally the selling strategy would possibly be profitable when the market goes down. But when the market moves sideways the third option — to stay aside — will be the cleverest decision.

In order to fully understand the core of the support and resistance trading strategy, traders should understand what a horizontal level is. A horizontal level is:. In order to develop a support and resistance strategy traders should be well aware of how the trend is identified through these horizontal levels.

Range trading identifies currency price movement in channels to find the range. This process is carried out by connecting a series of highs and lows with a horizontal trendline.

In order to determine the upward or downward movement of the volume, traders should look at the trading volume bars usually presented at the bottom of the chart. Using Multiple Time Frame Analysis suggests following a certain security price over different time frames.

Through the Multiple Time Frame Analysis MTFA traders can regulate the trend both on smaller and bigger scales and recognize the overall market trend. The whole process of MTFA starts with the exact identification of the market direction on higher time frames long, short or intermediary and analyzing it through lower time frames starting from a 5-minute chart. While technical analysis is focused on the study and past performance of market action, Forex's fundamental analysis focuses on the fundamental reasons that make an influence on the market direction.

What and how people feel and how it behaves in the Forex market is the notion behind the market sentiment strategy. Forex trading strategies can also be developed by following popular trading styles including day trading , carry trade, buy and hold strategy, hedging, portfolio trading, spread trading, swing trading , order trading, and algorithmic trading.

Day trading strategy represents the act of buying and selling a security within the same day, which means that a day trader cannot hold a trading position overnight.

Day trading strategies include:. In the case of performing day trading, traders can carry out numerous trades within a day but should liquidate all the trading positions before the market closes on said day.

Important Note: The longer a trader holds a position, the higher the risk of loss will be. Depending on the trading style chosen, the price target may change. Forex scalping is a day trading strategy based on quick and short transactions, used to make numerous profits on minor price changes. Scalpers can implement up to hundreds of trades within a single day — and is believed minor price moves are much easier to follow than large ones.

The main objective of following the Scalping strategy is:. Fading in the terms of forex trading means trading against the trend. If the trend goes up, fading traders will sell expecting the price to drop and visa-versa. Unlike other types of trading which target the prevailing trends, fading trading requires taking a position that goes counter to the primary trend. The main assumptions on which fading strategy is based are:. The main concept of the Daily Pivot Trading strategy is to buy at the lowest price of the day and sell at the highest price of the day.

Momentum trading is based on finding the strongest security which is also likely to trade the highest. The Momentum trading strategy is based on the concept that an existing trend is likely to continue rather than reverse. Traders following this strategy is likely to buy a currency that has shown an upward trend and sell a currency that has shown a downtrend. Carry trade is a strategy in which traders borrow a currency in a low-interest country, convert it into a currency in a high-interest rate country, and invests it in high-grade debt securities of that country.

The principle is simple- buy a currency whose interest rate is expected to go up and sell the currency whose interest rate is expected to go down. Hedging is commonly understood as a strategy which protects investors from incidence which can cause certain losses.

The idea behind currency hedging is to buy a currency and sell another in the confidence that the losses on one trade will be offset by the profits made on another trade. This strategy works most proficiently when the currencies are negatively correlated. Portfolio trading, also known as basket trading, is based on the mixture of different assets belonging to different financial markets Forex, stock, futures, etc. The concept is diversification, one of the most popular means of risk reduction.

The Buy and hold strategy is a type of investment and trading traders buy the security and holds it for an extended period of time. Pair trading spread trading is the simultaneous buying and selling of two financial instruments which relate to each other. The difference of the price changes of these two instruments makes the trading profit or loss.

Spread trading can be of two types:. Swing traders use a set of mathematically based rules to eliminate the emotional aspect of trading and make an intensive analysis. A false break occurs when the price looks to break out of a support or resistance level, but snaps back in the other direction, false breaking a large portion of the market out.

When prices begin to breakout higher a large portion of the market starts to look for the resistance to break and will enter long trades, often setting their stop loss on the other side of the resistance. This style of trading is normally carried out on the daily, weekly, and monthly charts.

As position traders, traders will often be trying to use the overall larger trend to gain the best positions and capture long-running trades.

When the wick is longer than the body, Traders will know that the market is deceiving them and that they should trade in the opposite way.

This is a short-term strategy based on price action and resistance.

In this post, you are going to find the 21 most popular basic trading strategies that have influenced a lot of successful algorithmic and quantitative trading systems. These strategies are proven systematic trading methods, that have been implemented not only by individual algo traders but have also been used by the quant trading desks of established hedge funds and other financial institutions.

As you have probably found by now, quite often it is very hard to find inspiration when trying to design your next automated trading system. Sometimes you just get stuck with what you already know, and your mind just cannot go out of these limits. Below you will find the list of the 21 most popular trading strategies you can use to jump-start your ideas again.

The price-momentum strategy is based on buying the best-performing stocks and selling the worst-performing stocks, according to a predefined criterion. The performance criterion can be cumulative return, mean return, or risk-adjusted return. What is different is the performance criteria. In the price-momentum strategy, the performance criterion is return, while in the earnings-momentum strategy the criterion is based on earnings. This strategy is also based on buying the top winners and selling the bottom losers, like the price-momentum and the earnings-momentum strategies above.

The low-volatility anomaly trading strategy relies on the observation that the future returns of low-return-volatility portfolios outperform the returns of high-return-volatility portfolios. While this is counter intuitive because the general notion that higher risk yields higher returns the low-volatility anomaly strategy shows quite good returns.

The observation suggests that stocks with the largest increases in call options implied volatilities over the previous month on average tend to have higher future returns. On the other side it of the observation, stocks with the largest increases in put options implied volatilities over the previous month on average tend to have lower future returns.

The multifactor strategy relies on buying and selling short stocks based on more than one factor. The observed factors can be value, momentum, volatility, etc. As a result, a trader can combine uncorrelated factors and extract additional value for the portfolio. Pairs trading is a classic example of a mean-reversion strategy. The first step in the pairs trading strategy is based on identifying a pair of stocks with highly correlated historical performances.

The next step of the strategy is to monitor how the correlation between the two stocks changes over time. When mispricing is observed, the trader sells short the overpriced stock and buys the underpriced stock.

The single moving average is one of the very basic trading strategies. It is based on the price of an asset stock, futures contract, currency pair, etc. crossing up or down a moving average. The conditions in this system are quite basic.

If the price crosses up a moving average, the trader opens a long position. Vice-versa if the price crosses down a moving average, the trader opens a short position. It can be run as a long-only, short-only, or long-short strategies in single or multi-asset setups. The moving averages crossover is another very popular trading strategy. It relies on two moving averages — a fast one short period and a slow one long period.

The trading logic of the moving average crossover is very similar to the single moving average strategy. What is different is that the trader is looking for a cross-over of the fast and the slow moving averages instead of just the market price and a single moving average. Read more about Moving Averages and MA trading strategies in the following article: How to use Moving Average to successfully analyze market trends? The multiple moving averages crossover strategy adds additional moving averages with different durations in addition to the fast and the slow moving averages in the strategy above.

The additional indicators can be used to filter false signals. For example, instead of opening a long position when the fast-moving average crosses above the slow one, the trader waits for a third moving average also to cross before opening his position. The pivot points support, and resistance strategy is based on the pivot points trading indicator.

This popular indicator has three basic levels — center, support, and resistance. In the strategy, the trader opens a long position when the market price crosses the central level upwards and liquidates it when it reaches the resistance level. The short position trigger signal is when the market price crosses the center level downwards and the target is hit when the support level is reached.

There are several trading indicators that consist of channels, with the most popular being Donchian channel, Bollinger bands, and Keltner channel.

The concept of a channel trading strategy is to buy or sell short an asset when it reaches the bottom or the upper level of a channel. A channel consists of two lines forming a band withing the price fluctuates. There are two signal conditions in channels trading — the price would bounce back from a channel, so the trader would expect it to remain in the channel or the price would break through the channel which signals the emergence of a new trend.

Merger arbitrage or also known as risk arbitrage is a trading strategy aiming to capture an excess return that is occurring due to corporate actions such as mergers and acquisitions.

You can find a merger arbitrage opportunity whenever one publicly trader company is trying to acquire another public company at a price that is different from the current market price. There are two types of mergers — cash and stock merger. The strategy in the case of a cash merger is to establish a long position in the target company stock. In the case of a cash merger, the strategy is to establish a long position in the target company stock and a short position in the acquiring company stock.

The market making strategy is one of the most popular ones in algorithmic and quantitative trading. It is as simple as capturing the bid-ask spread for a given trading instrument — you buy at the bid and sell at the ask. However, like many things in life there is much more than that. The alpha generation is a strategy where the traders are trying to gain an edge by data mining and machine learning methods. An alfa is every trading strategy resulting from this generation which has reasonable expected return.

The carry trade is one of the most popular FX trading strategies. It is based on gaining from the interest rate differentials between two currencies. In the carry trade strategy implies that high interest rate currencies should lose value versus low interest rate currencies. In the basic carry trade strategy, the trader sells short forwards on currencies that are quoted at a premium the forward FX rate exceeds the spot FX rate and vice-versa.

This strategy is not a risk-free arbitrage, because there is a chance that the FX rate suddenly changes, and the trader is exposed to exchange rate risk. The Forex triangular arbitrage is a trading strategy based on opening positions in 3 currency pairs. For example, EURUSD, USDJPY, and EURJPY. The system is relying on catching discrepancies arbitrage opportunities occurring by opposing positions where the rate of one currency pair diverges from the cross rate between, the other two.

For example, if the result of exchanging EUR to USD is different than the result from exchanging EUR to JPY and JPY to USD there is an arbitrage opportunity. Roll yields occur from rebalancing futures positions. When a futures contract is about to expire, it needs to be replaced with another futures contract with longer expiration.

If the price of the front futures contract is higher than the following month futures price, there is backwardation. If it is the opposite — the price of the front futures contract is lower than the price of the following month futures price, then there is contango.

In commodity futures markets the near-month contracts react to supply and demand changed quicker than further-month contracts most of the time. As a result, a trader can implement a trading strategy, called calendar spread which aims to gain from the difference. There are two types of calendar spread. The bull futures spread is based on buying a near-month futures contract and selling the further-month contract. The bear futures spread is the opposite — you sell the near-month contract and buy the further-month one.

The convertible arbitrage strategy is based on convertible bonds. A convertible bond is a security with hybrid properties that gives the investor the option to convert the bond from a fixed-income instrument to equity. This transformation happens according to a predefined conversion ratio of bonds to stocks when the stock price reaches a certain level called conversion price.

The convertible arbitrage strategy is based on buying a convertible bond and selling short the underlying stock. The sentiment analysis strategy is based on extracting trading signals using machine learning algorithms applied to social media data. The process starts with the collection of social media posts most frequently tweets that are containing at least one keyword listed in vocabulary over a predefined time frame.

The second step is cleaning the data. After this is completed the data is further processed by the machine learning algorithms aiming to extract models that can be used to predict the price movements according to the public sentiment. We hope that this list of 21 most popular trading strategies was useful for you! Sources: 1 Trading Strategies, , Kakushadze, Zura et al.

No part of the content of this website constitutes a recommendation to apply any investment strategies presented or implied in any of the site content. No part of this website or its content should be considered any type of investment or other advice related to your personal circumstances. You must take independent financial advice from a qualified professional when making any type of financial decision which may or may not be directly related to information found on this website.

Yes, we know it might be too long to read right now. But you can sign up for our newsletter and receive quality educational content directly to your inbox. You can unsubscribe at any time. The 21 most popular trading strategies every serious trader should learn to succeed Home Our Blog. Diyan Doychev - May 19, Contents hide. Learn more about algorithmic trading, quantitative analysis and automated systems directly in your inbox.

Subscribe to our e-newsletter. I agree with the Privacy Policy. Close this module. Before you go! Sign up for our newsletter. First Name John. Last Name Smith.

While they do occur, true breakouts are not all too common on the forex. Similar in function, but in the opposite direction to the breakout strategy is the breakdown strategy. Thus, potential big profits are possible through the implementation of positive risk vs reward setups. The carry trade is one of the most popular FX trading strategies. Many forex traders believe levels that were important in the past could be important in the future.

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