You might be thinking that the best traders use complicated strategies to qualify for the Grand Finale of the Trading Cup each year.
Today we are going to dispel that myth and provide 10 trading strategies that traders have used to qualify for the Grand Final since 2018.
Although you will be familiar with the strategies mentioned below, one of the common traits of the best traders is the ability to execute their strategies with accuracy.
Think about your trading over the last month or last year. If you could remove your 3 worst trades made due to mistakes, how different would your results be?
Here are the 10 trading strategies traders use in the Trading Cup
1. Breakout trading: Use support and resistance levels and trade the momentum of a break either long or short. Often, once an instrument (Gold shown below) breaks a key support or resistance level, it can make a strong run higher or lower.
Short-term traders love this type of move. Traders will often place a stop on the other side of the breakout level, which provides an excellent risk:reward trading setup.
2. Swing trading: Trading the swings in the market. Find an up-trending FX pair that is oversold and buy on a confirmed swing higher. Or a down trending FX pair that is overbought and sell on a confirmed swing lower.
One strategy many like to follow is find solid uptrending FX pairs and use an oscillator to show oversold levels. On confirmation of the FX pair turning out of oversold, they go long.
3. Forex scalping: This I where a trader is looking to lock in gains on small price swings and stopping out with small stops. The risk-reward is often 1:1, and this strategy relies more on a high win percentage.
For example, last month’s winning trader used a style of scalping to claim victory. You can read more about his method via the chart below or ready about it in full here.
4. Price action trading: As our Chief Market Analyst likes to say ‘Trading Naked’ with no indicators or very few and reacting to the pure price action. Many price action traders tend to lean towards the fundamental data over technical indicators, but still confirm the overall trend within the context of placing their next trade.
5. Trend following: Popularised by the Turtle Traders and then Curtis Faith (a former Turtle Trader), this involves riding trending moves for as long as possible, using trailing stops and maximise your opportunity by adding to winning positions and cutting losses short.
6. Range bound trading: Using oscillators (overbought and oversold indicators like the Stochastic or RSI) and buying weakness and selling strength in range-bound markets. The mantra here is to ‘buy weakness’ and ‘sell strength’.
One key to picking moves when using oscillators, is to understand that oscillators are terrible in trending markets.
The stochastic indicator for example, is looking for where is today’s close in relation to the high or low over the last X days. So if a market is trending, the stochastic will continue to show overbought, when in fact it is just trending.
That’s where range bound traders find their niche. Find a sideways market, apply your oscillators, like the stochastic, and trade the overbought and oversold signals.
7. Automated trading through Expert Advisors (EAs): Gustavo was a previous Trading Cup prize winner who used automated strategies to achieve an incredible return to qualify for the 2019 Grand Final. You can see in Stage 2 of the 2020 Trading Cup, Gustavo is coming 8th after the first week of trading, up 20.59%.
He has a knack for developing EAs and has continued to do this in the 2020 Trading Cup too.
8. Candlestick charts: Steve Nison made this technique famous and this is the most common way for viewing charts all around the world. There are many bullish and bearish candlestick patterns such as Bullish/bearish engulfing pattern, Piercing line, Dark Cloud Cover, Rising three periods, Doji star, hammer, bullish/bearish harami. You can use candles for both entries and exits.
9. Pattern trading: Thomas Bulkowski wrote the most comprehensive book on Trading Patterns, aptly titled ‘The Encyclopedia of Chart Patterns’. This strategy is excellent for visual traders who can spot patterns such as ascending triangles, pennants, flags, double and triple tops/bottoms, head and shoulder patterns and cup and saucer to name a few.
10. Fibonacci trading: Fibonacci is freely available on all MT4 & MT5 platforms and helps traders identify key retracement levels and Fibonacci extension levels based on the Fibonacci ratios. Many traders like to use Fibonacci levels for key retracement levels, support and resistance levels and potential price extensions.
What methods are you going to use?
You likely have a favourite strategy you are currently using or perhaps you are getting started and want to test your new strategies in a live trading tournament.
No matter what you choose, the experience you gain will put you in an incredible position for the rest of the year.
Nothing beats a live trading tournament to refine your edge in the markets.
Ashley Jessen is the author of CFDs Made Simple and Chief Operating Officer at ACY Securities. He has been in the financial services industry since the year 2000 and worked for some of the leading companies in the CFD, Forex and Online Trading space.