Trading Ideas

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Updated: 06 August 2020

In the world of finance, successful investment ideas are usually based on extensive research, in-depth market analysis, and filtered backtesting of historical price activity for specific assets. These comprehensive trading strategies are designed to identify market environments in which strong statistical probabilities suggest economic trends are likely to continue in the future. Once these favorable scenarios are identified, real money trades can be placed before substantial price moves occur in the market. For new traders, these are concepts that might seem elusive or difficult to repeat in a consistent fashion. Fortunately, a significant amount of financial research has already been conducted on each of these topics, so it’s not even a requirement for new traders to devise a way of outperforming the market that is completely unique in order to start executing live trades. Instead, investors can learn from the best trading ideas developed by market experts and capitalize on the financial concepts that have achieved success in the past.

In these ways, we can see that even traders with no prior experience are able to benefit from the strategies uncovered by the market’s best trading ideas. Investment strategies that consistently beat the market can take a number of different forms. However, most of the focus tends to be placed on whether technical analysis or fundamental analysis is the driving ideology behind the approach. Technical analysts are known to devise trading ideas that base projections on price chart histories, while fundamental analysts are known to use economic trends as the basis for market positions. This is why it’s important for each trader to decide which method is most likely to work in each case, but there is nothing wrong with using a combination of both strategies as a way of structuring live trades in the market.

Trading Stances and Time Frames

Once each trader decides on the appropriate mixture of technical analysis and fundamental analysis, it’s often a good idea to get a sense of which time frames will be monitored when looking for new trading opportunities. There are some significant differences that exist between long-term traders and short-term traders, so it is really a matter of determining each trader’s strengths and weaknesses in order to understand which approach is likely to produce the best results. Traders that are able to monitor their trading stations on a daily basis might be able to benefit from short-term trading strategies. However, actively monitoring a trading station on a daily basis is not going to be a possibility for everyone. In these cases, longer-term strategies should be implemented so that there is more flexibility in terms of the ways each trader needs to actively manage open positions.

Short-term trade ideas are often based on price chart analysis or recent market news events. This means that both technical analysts and fundamental analysts can execute trades as a day trader. Longer-term trade ideas can also be based on price chart analysis, but this tends to be less common in practice. In most cases, long-term trading strategies (or positions that remain open for longer than 2-3 days) are based on economic factors that may influence market valuations going forward. Technical analysis can still be used in these situations, but its inputs might be somewhat secondary in nature. Once the original trading stance is established through fundamental analysis, charting strategies can be used in order to determine specific entry and exit levels. This approach can allow traders to identify trade parameters that are highly accurate and efficient, so there are benefits to consider when compared to simply trading strategies that are based on fundamental analysis alone.

Selecting Specific Asset Classes

Trading ideas are also based on the characteristics of various asset classes that are commonly traded in the market. Popular examples include stocks, bonds, commodities, foreign exchange, and cryptocurrencies. Each of these asset classes can be actively traded in the market but there are also differences that should be noted so that traders can understand how valuations can be impacted after certain types of market events. For example, precious metals (like gold, silver, and platinum) tend to perform best during times of generalized market uncertainty. However, these assets might also experience significant selling pressure when appetite for risk amongst most investors is strong. As a result, having an understanding of the market’s current context can make all the difference in terms of whether a trade idea succeeds or fails once it is initiated.

High-probability trade ideas can also benefit from proper position structuring, which includes the use of stop-loss orders and profit taking orders. No trader can say with 100% certainty that any given position will result in gains or losses, so the use of stop-loss orders can help to prevent any one trade from becoming overly problematic for an account. Unfortunately, effective stop-loss placement is often an underappreciated aspect of the trading plans that are executed by many newer traders. However, there is really no substitute that is currently available which has the same protective properties as a well-placed stop-loss order and this is why they should be used as a protective strategy in all active market positions.

Trading plans that are structured objectively tend to produce superior results for investors because these trades are not significantly impacted by emotional reactions in the event market prices move in an unexpected direction. To some extent, this is an inevitability and this is why investors must always prepare in advance for situations that could result in potential losses. When trading parameters are established in such a way that profit targets are allowed to run further than potential losses, it is possible to generate positive returns over time. Ultimately, this is the goal of any market trader because it means that total trading losses have been overcome and eclipsed by gains. For most investors, the measure of success in any trading career can be defined by the extent to which profits outpace losses and the trading tutorials available in this section are designed to help traders achieve these types of positive results in a consistent manner.