If you have somewhat idea about the trading industry, you would know that the trading market is very prone to fluctuations. By fluctuations, we mean the changes that occur within the price ranges of a trading commodity in a short time. In trading, various external factors influence the price value like economic indicators, political situation and many more.
Supply and demand also play a huge part in price fluctuation in trading. You must be wondering why. It is because when the demand for a financial instrument increases in any part of the market, the value increases as many people want to have that good in possession. This is more like low pressure. Demand is created due to a shortage of that product. So, when the quantity of goods is less compared to the number of customers, sellers tend to increase the price to eliminate the non-potential customers from the field. Thus, the rise in demand leads to an increase in the monetary value of a product.
On the other hand, when the supply is more than the demand, the sellers tend to decrease the price to attract more customers. That is why supply and demand is one of the constant reasons behind price fluctuations while trading.
Again, economic indicators like employment rate, GDP, the budget play vital roles in trading. These economic indicators are subject to media release and they tend to indicate the economic condition of a country. These indicators show the economic policies of a country because when the indicators go upward, it means the economy is booming while going down means the economy is demoting.
Since many aspects influence the market, the traders always tend to adopt different moves to apply in their trading. It is because trading is a platform full of uncertainty. No one knows what is going to happen the next moment. So, to level down the effects of these uncertain situations, traders take some straightforward approach to minimize their loss and increase their profit rate.
Here are some of the most used strategies used by traders to opt for making a profit.
It is one of the most popular strategies that even beginners can use this due to its simplicity. Momentum is used to indicate the movement of stocks which can be up to 30% per day. One can simply stay put at his position until coming across a suitable value to sell and close the trade. Many UK traders have changed their life just by taking the trades with advanced broker Saxo. Check it out here and see the features of their trading account.
Scalping has been a game-changer for many traders in long term trading where traders can sell stocks as soon as the trade becomes profitable. Even though it can be a bit risky at times, having a high trade probability can help to cancel out the risk rate.
Entry and exit points
One of the most and must-know strategies for the traders is to know when to enter and exit a trade. When the price level hits the support, it is the best opportunity to buy stocks and enter a trade. On the other hand, selling stocks at resistance is the best exit point to close a trade.
Mostly used by the day traders, range trading is one of the most effective strategies out there if executed properly. Here, traders buy stocks from oversold locations where the demand is less. As a result, the price also remains low. Then selling the previously bought stocks in overbought places where the supply is less than the demand. In this way, traders can make a profit due to the difference in cost and selling price of the product. But this strategy requires a good amount of research without which there is a potential risk of losing the trade.
As a trader, you should know that your profits hugely depend on the strategies you adopt. So, be very patient and careful when you are coming up with strategies to use in your trading and always remember to continue practising. Best of luck!