Developing A Trading Strategy (Part 2)
Three popular technical analysis strategies include:
- Trend trading
This strategy aims to generate profits by analysing an index’s trend.
A trend occurs when an index moves in one direction for a long period of time. Once you have identified the trend, it may be possible to profit from it by trading in the same direction as the trend.
- Support and resistance trading
This strategy aims to generate profits by identifying an index’s support and resistance levels.
Support is the level on the chart where the index’s price finds it difficult to fall below.
Resistance is the level where the index’s price finds it difficult to go above.
Once these areas have been identified, it may be possible to profit by placing trades at the area where the index’s price is likely to reverse.
- Breakout trading
This strategy aims to generate profits by identifying indices that have broken through established support or resistance levels.
Breakouts can be strong signals, especially when confirmed by other technical analysis indicators.
Fundamental analysis and technical analysis both have their advantages and disadvantages.
For this reason, many traders use a combination of both when trading indices.
Tip: Learning from FOLLOWME Popular Investors can help you develop a robust indices trading strategy. Many Popular Investors have significant experience trading indices, and their advice can be invaluable.
Reprinted from eToro, the copyright all reserved by the original author.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.