Learn Strategies
Before coming up with a plan a trader must learn about the various strategies that they can sue to trade indices. Coming up with the right strategy can increase your chances of becoming more successful in stock indices trading.
For traders who want to learn about strategies there are 50 indices strategies listed in the strategies section of this strategy. This strategy section also shows traders how combine these strategies to create a stock system. The trading is a set of rules that will be used by stock traders to generate signals. For example the system rules will specify how two or more indicators will be used together to generate a buy or a sell trade signal.
As a trader the strategy you choose should be applied in your trading once you decide what type of trader you are & what type of method you will be using to analyze the market moves.
For examples you may decide you want to be a scalper you will use your scalping strategy and only open traders for a few minutes. If you're a trend trader you will use your strategy after you've decided the trend of the market. If the trend is upwards you will use your strategy to open buy stock indices trades.
If you are a day trade you'll use your trading strategy to open trades that will only be opened for a few hours. Your trades should all be closed during the day and you'll not hold your trades overnight. As for the method which may be that of trend following you will first draw trendlines on the chart to determine the overall market trend & after that you will then apply your strategy to open trades.
In analysis there are various techniques used to trade indices which a trader might use to ascertain which of these techniques of trading they will be using when trading the market. After choose in their method traders will then apply their strategy to open trades.
Types of Trading Methods
There are two general methods of the market, these are:
1.Trend Trading
2.Range Trading
Trend Trading
In this method a trader will first of all determine the overall market trend before applying their strategy to open trades.
To determine the trend - this can either be an upward trend or a downwards trend.
A trader may use trend lines or moving averages to determine the overall market trend. After determining the market trend then the trader can use their strategy to open trades.
For example a trader may determine that the market trend is upwards by using moving averages. The trader may then use a stock indicator such as Bollinger bands and open trades once the price retraces to the lower Bollinger band because this lower band will act as the support level of price. Therefore the strategy that the trader will be using is the strategy of resistance & support levels and the trader will be using Bollinger bands to determine these points & open and close trades based on these points.
Range Trading
Range trading is a method of trading indices that move within a particular band of prices and only oscillates between these two points without moving much outside these two points.
A trader will then use the strategy of support and resistance to determine which levels to open buy or sell trades. The trader will draw a support line & a resistance line. The support level will be used to open buy stock trades and the resistance level will be used to open sell trades.
The most popular technique between these 2 is the trend method. Traders should always try to trade with the trend method as this technique is the most reliable technique in trading indices. Even though sometimes the market will be trending and at other times the market will be moving in a range when the market is consolidating traders should try to trade the market only when there is a trend. After determining the trend traders will then use their strategy to determine when to open buy or sell stock trades that are in direction of the overall market trend.
Once you have decided what type of trader you are: scalper, day trader or swing trader you should then come with the following:
1.Method
2.Trading Strategy
After coming up with this 2 you will then combine these 2 & use these to detect when to buy or close trades.
You can then practice trading on the practice trade account so as to determine profitability of your method & trading strategy. You'll then use the results to improve the profitability of your method and strategy & once you have gained experience to trade with these 2 you can then open an account & start trading the live market.
