Decoding the Best Trading Practices to Achieve Financial Freedom

When you’re hoping to profit from regular, moderate price swings, day trading tactics are critical. Technical analysis, which uses graphs/charts, indicators, and patterns to forecast future price trends, is the foundation of a steady, efficient approach. 

But, do all users who have a trading account perform the analysis? According to a MarketsMojo research report published in The Hindu Business Line, only 0.95 crores of the four crore Demat accounts are active. The reason is simple:  lack of analysis, limited or no technical knowledge, and inadequate strategies. 

This article will go over some of the best trading practices that can help you achieve financial freedom. 

Effective Trading Strategies  

When trading on the financial markets, you’ll come across a range of trading tactics. You can also discover that one strategy works better for you than another. Eventually, you must choose which trading method is best for you to achieve your desired target. 

Below are some common and effective strategies that are broadly used in trading. 

 

1. Breakout Strategy 

When the price clears a specific level on the chart with higher volume, breakout methods come into the equation. Once the asset or security crosses the above resistance, the breakout trader gets into an extended position. If the stock breaks below support, you can begin a short position. Calculate a reasonable price goal based on the asset’s recent performance. This method will be considerably more accurate if chart patterns are used. 

 

2. Scalping Strategy 

Scalping is one of the most common trading tactics used by active traders. It comprises finding and profiting from bid-ask margins that are a bit wider or narrower than usual due to short supply and demand discrepancies.  

A scalper does not try to profit from massive movements or transact in enormous numbers. Instead, they try to profit from minor movements that happen regularly, and they do so with careful timing. 

 

3. Swing Trading Strategy 

It is a method of trading that strives to capture short- to medium-term gains in a stock (or other monetary means) over days to weeks. 

While a few traders favor equities that are highly volatile and have a lot of flexibility, others may choose less volatile stocks. Swing trading, in each situation, has been the way of determining where an asset’s price will go next, taking a position, and then profiting if the prediction is accurate. 

 

4. Day Trading Strategy 

The most well-known active trading style is day trading. It’s frequently used as a simple illustration for active trading. Positions are filled and closed on the same day, and no stock is retained ahead. Professionals, such as specialists and active traders, have traditionally done day trading, but e-trading platforms have made it possible for beginners to join. 

 

5. Pivot-point Strategy 

A day trading pivot-point technique can be beneficial for detecting and executing crucial support and resistance levels. Range-bound traders can use pivot points to find entrances, while breakout traders can use pivot points to find significant levels that must be broken for a move to be considered a breakout. 

 

It’s also a technique that can be used with indexes, provided it is calculated using an extended time frame. 

Must-have Components of Every Trading Strategy 

Selecting the appropriate stock is critical if you want to profit from minor price swings. The three crucial criteria outlined below must be considered whether you’re looking for systematic day trading methods or beginner or advanced strategies. 

 

A. Liquidity

The degree to which an item may be acquired or traded rapidly in the market at a price reflecting its actual worth is referred to as liquidity. Because cash can be transformed into other assets quickly and readily, it is usually regarded as the most liquid asset. 

 

B. Volatility

This indicates your potential profit/loss range—the higher the volatility, the larger the potential profit or loss. The deviation or variation in returns from the same security or market index is commonly used to measure volatility. 

 

C. Volume

The total number of shares exchanged (bought and sold) during a trading day or a certain period is referred to as volume. It is a measurement of total share turnover. A rise in volume is often a sign that a price change, either up or down, is on the way. 

 

D. Momentum

The pace or velocity of a price change is called momentum. It reflects how quickly or slowly the price of the traded instrument will move. Picking up a scrip with more momentum is a smart option since it will get to the target faster and make the best use of the deployed capital.  

 

All trading techniques are unique in their approach and performance in various market conditions. If you’re a budding or an experienced trader striving for financial independence, you should be well-versed in these tactics. 

You can enroll in various stock marketing and day trading strategy courses or join organizations specializing in stock market approaches and effective implementation. These courses or institutions will help you better comprehend the stock market, trading features, and various strategies. 

Trade2Transform, a trend-following trading and teaching platform, helps beginners and active traders learn, develop, and attain financial independence with its wide range of courses. It’s a forum where you can learn from the finest in the business and flourish in your stock marketing career.  

 Book an appointment for a free consultation with Trade2Transform and get started on your quest to becoming a successful stock marketer.