10 Best Trading Strategies and Techniques Every Trader Needs to Know

In this article, you’ll discover the 10 best trading strategies and techniques, how they work, and when to use them effectively. You’ll learn key techniques like trend trading, scalping, swing trading, and breakout strategies, along with insights on choosing the right approach based on market conditions and risk tolerance. Whether you’re a beginner or an experienced trader, this guide will help you develop a solid trading plan and improve your decision-making.

What is Trading?

Trading is the process of buying and selling financial instruments, such as stocks, commodities, forex, and indices, with the goal of making a profit. Unlike investing, which focuses on long-term wealth accumulation, trading involves taking advantage of short-term price movements. Successful traders use trading strategies to make informed decisions and minimize risks.

Discover the difference between trading and investing.

What is a Trading Strategy?

A trading strategy is a systematic plan that traders follow to determine when to enter and exit trades based on market conditions, technical analysis, and fundamental analysis. These strategies help traders manage risk, improve consistency, and maximize profitability. Whether you’re a beginner or an experienced trader, understanding the best trading strategies can significantly impact your success in the financial markets.

10 Best Trading Strategies

There are various trading strategies traders use to navigate the markets and maximize opportunities. The 10 best trading strategies include: 

1. Trend Trading

Trend trading is a widely used strategy where traders follow the dominant direction of an asset’s price over a period of time. The key principle is that “the trend is your friend,” meaning traders enter positions in the same direction as the trend rather than against it. Trend traders use moving averages, trendlines, and momentum indicators to confirm trends and identify optimal entry and exit points. This strategy works well across forex, stocks, and commodities, and can be applied in both bullish and bearish markets.

Key Techniques:

• Identifying higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend.
• Using trendlines and moving averages to confirm the trend direction.
• Applying indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) to gauge momentum.

Example: A trader notices that XAUUSD (gold) has been steadily increasing for three months. Using the 50-day moving average, they enter a long trade and hold their position, exiting only when the price crosses below the moving average, signaling a potential trend reversal.

2. Day Trading

Day trading involves opening and closing multiple positions within a single trading session, meaning traders do not hold trades overnight. The goal is to profit from small price movements by taking advantage of intraday market volatility. Day traders rely on short-term price patterns, volume indicators, and technical analysis tools to make quick decisions. This strategy is best suited for markets with high liquidity, such as forex, indices, and large-cap stocks, where price fluctuations happen frequently. Due to the fast-paced nature, discipline, risk management, and quick execution are crucial for success.

Key Techniques:

• Identifying assets with high daily volatility and trading volume.
• Using short-term indicators like Bollinger Bands, VWAP (Volume Weighted Average Price), and RSI.
• Applying stop-loss orders to minimize potential losses.

Example: A trader observes that EUR/USD has a daily range of 50-70 pips. By analyzing short-term price movements, they enter multiple buy and sell positions, closing all trades before the market session ends to avoid overnight price fluctuations.

3. News Trading

News trading is a fundamental-based strategy where traders make decisions based on the market’s reaction to major economic reports, earnings releases, or geopolitical events. Prices often fluctuate sharply following major announcements, creating potential opportunities for profit. However, because market reactions can be unpredictable, traders must analyze economic calendars, central bank decisions, and key financial reports while preparing for possible volatility. News traders often enter trades just before or immediately after a report is released, aiming to capture the initial price spike or post-news trend continuation.

Key Techniques:

• Monitoring economic calendars for events like Non-Farm Payrolls (NFP), Federal Reserve decisions, and GDP reports.
• Reacting quickly to breaking news affecting market sentiment.
• Understanding market expectations vs. actual data releases.

Example: Before the US NFP report, a trader anticipates that a strong job market report will strengthen the USD. They enter a long position on USD/JPY minutes before the report is released, benefiting from a sharp price surge after positive data.

4. Scalping

Scalping is an ultra-short-term strategy that focuses on making small, frequent profits by executing multiple trades in a short time frame, often within seconds or minutes. Scalpers target tiny price movements and rely on high liquidity and tight spreads to minimize costs. This strategy is ideal for high-volume forex pairs, stocks, and commodities. Scalping requires fast execution, low latency platforms, and strict risk management, as multiple small losses can quickly erode profits. Since scalping depends on quick trades, it is best suited for traders who can stay glued to the screen and react instantly to price movements.

Key Techniques:

• Using one-minute and five-minute charts to spot trade opportunities.
• Entering and exiting trades quickly without holding positions for too long.
• Relying on tight spreads and low trading fees to maximize profits.

Example: A forex trader identifies a 5-pip price movement in GBP/USD and enters multiple quick trades within a 30-minute window. By executing rapid buy and sell orders, they accumulate small gains that add up over time.

5. End-of-Day Trading

End-of-day trading involves analyzing price movements at the market close and placing trades accordingly, often holding positions overnight. Traders focus on the daily closing price, as it reflects the most significant market sentiment for that session. This strategy is useful for those who cannot monitor markets constantly but still want to participate in short-term trading. End-of-day traders use candlestick patterns, support/resistance levels, and moving averages to make informed decisions. The main advantage is that traders can avoid intraday market noise while still capturing meaningful price movements.

Key Techniques:

• Studying daily candlestick patterns for market sentiment.
• Using support and resistance levels to define entry and exit points.
• Placing trades just before the market closes and holding positions overnight.

Example: A trader observes that NASDAQ 100 is forming a bullish engulfing candlestick pattern at the market close. Expecting continued upward momentum, they place a long trade before the next trading session begins.

6. Momentum Trading

Momentum trading is based on the idea that assets with strong upward or downward momentum will continue moving in the same direction for a period before reversing. Momentum traders aim to ride the wave of strong price movements and exit before momentum weakens. This strategy is often used in response to earnings reports, strong economic data, or market hype that causes sharp price increases or decreases. Momentum traders rely on MACD, RSI, and volume indicators to identify high-momentum opportunities. However, since momentum shifts can be abrupt, traders must be prepared for quick reversals.

Key Techniques:

• Using MACD, RSI, and Moving Averages to identify strong momentum.
• Trading assets experiencing high volume surges.
• Timing entries with breakouts and trend confirmations.

Example: After Tesla (TSLA) reports record-breaking earnings, the stock price surges. A momentum trader enters a long trade, riding the stock price increase for the next two days before exiting when signs of slowing momentum appear.

7. Range Trading

Range trading is used in sideways or non-trending markets, where an asset’s price fluctuates within a well-defined range. Traders buy at support and sell at resistance, profiting from predictable price swings. This strategy is most effective in markets with low volatility, where assets are not making new highs or lows. Traders rely on technical indicators like Bollinger Bands, RSI, and trendlines to confirm the trading range. Since range-bound markets eventually break out, traders must also watch for early signs of breakouts to avoid losses.

Key Techniques:

• Identifying horizontal trading ranges using trendlines.
• Using Stochastic Oscillator to detect overbought/oversold conditions.
• Placing stop-loss orders just outside the range to manage risk.

Example: A trader notices that USD/JPY has been fluctuating between 145.00 and 147.00. They buy near 145.00 and sell at 147.00, repeating the process until a breakout occurs.

8. Breakout Trading

Breakout trading focuses on identifying key price levels where an asset breaks above resistance or below support, signaling a strong movement in the breakout direction. This strategy helps traders catch large price swings early before the new trend gains momentum. Successful breakout traders identify consolidation zones and wait for high trading volume confirmation before entering trades. Breakouts often occur after important news releases, economic events, or prolonged market consolidation. Since false breakouts can occur, traders typically use stop-loss orders to protect against unexpected reversals.

Key Techniques:

• Identifying consolidation zones before a breakout.
• Using Bollinger Bands and Volume Analysis for confirmation.
• Placing stop-loss orders below the breakout level.

Example: A trader monitors Amazon (NASDAQ: AMZN) consolidating at $200. When the price breaks above $210, they enter a long trade, anticipating further gains.

9. Swing Trading

Swing trading is a medium-term strategy where traders hold positions for several days to weeks, capturing short-term price swings within a larger trend. Unlike day traders, swing traders are not concerned with intraday fluctuations but rather with broader market movements. They use chart patterns, Fibonacci retracements, and moving averages to identify potential entry and exit points. Swing trading is suitable for traders who cannot monitor markets constantly but still want to capitalize on market fluctuations. Since trades are held overnight, swing traders must also consider overnight risk and market gaps.

Key Techniques:

• Identifying chart patterns like head and shoulders, double tops/bottoms, and triangles.
• Using Fibonacci retracement to find key support and resistance levels.
• Applying moving averages (50-day & 200-day) to determine trend direction.
• Setting stop-loss and take-profit levels based on previous swing highs/lows.

Example: A trader spots a double-bottom pattern in WTI and Brent crude oil, signaling a potential uptrend. They enter a long trade at the neckline breakout and hold for five days until the price reaches the next resistance level, securing a profit.

10. Gap Trading

Gap trading is based on taking advantage of price gaps that occur when an asset opens significantly higher or lower than its previous closing price. These gaps typically happen due to after-hours earnings reports, news events, or increased market demand. Traders use gap trading strategies to determine whether a gap will continue or “fill” (reverse back to previous levels). This strategy is commonly used in stocks and forex markets, where gaps are more frequent. Since price gaps can be highly volatile, traders need volume analysis and strong risk management to avoid getting caught in false moves.

Key Techniques:

• Recognizing gap types (Breakaway, Runaway, Exhaustion) to determine market sentiment.
• Using volume confirmation—high volume signals strong momentum, low volume may indicate a false move.
• Waiting for gap fills when prices retrace before continuing in the initial direction.

Example: A trader notices a gap in Apple stock (AAPL) due to a strong earnings report. Expecting bullish momentum, they enter a long trade after the market opens and ride the price increase before selling at a key resistance level.

Understanding different trading strategies can help traders navigate the markets more effectively. By applying the right strategy, traders can improve decision-making, manage risk, and maximize potential returns.

How to Choose a Trading Strategy

Selecting the right trading strategy requires considering several key factors:

• Determine Your Trading Style – Identify whether you prefer short-term trading like scalping or day trading, or if you are more suited to longer-term approaches like swing trading.

• Assess Your Risk Tolerance – Decide how much risk you are willing to take. Some traders are comfortable with high-risk, high-reward strategies, while others prefer steady, lower-risk methods.

• Evaluate Your Time Availability – If you can dedicate hours to active trading, intraday strategies may be ideal. If you have limited time, end-of-day or swing trading could be a better fit.

• Analyze Market Conditions – Understand whether the market is trending, range-bound, or volatile, and choose a strategy that aligns with the current environment.

• Practice with a Demo Account – Test different strategies in the VT Markets demo account in a risk-free environment before applying them to live markets to refine your approach and build confidence.

Conclusion

Every trader has a unique approach, and the effectiveness of trading strategies depends on individual preferences, market conditions, and risk tolerance. Whether you thrive on quick trades like scalping, prefer structured analysis in swing trading, or capitalize on breakouts and momentum shifts, having a well-defined plan and disciplined risk management is essential for success.

Start Your Trading Journey with VT Markets

With VT Markets, traders can access MetaTrader 4 (MT4) and MetaTrader 5 (MT5), offering ProTrader tools, daily market analysis, and seamless trade execution. These industry-leading platforms provide a user-friendly interface, automated trading capabilities, and a wide range of technical indicators to help traders implement their trading strategies effectively. Additionally, traders can also enhance their skills with comprehensive educational resources and expert insights, refining their approach to maximize market opportunities. 

Ready to apply the best trading strategies that suit you? Open a VT Markets account today and start trading with confidence!

Frequently Asked Questions (FAQs)

1. What is the most profitable trading strategy?

There is no single best trading strategy, as profitability depends on market conditions, risk management, and trader expertise. Popular strategies include trend trading, scalping, and breakout trading.

2. Which trading strategy is best for beginners?

Beginners often find trend trading and swing trading easier to start with, as they rely on simple indicators and longer timeframes.

3. Can I use multiple trading strategies?

Yes! Many traders combine strategies based on different market conditions. For example, you can use range trading in a sideways market and momentum trading during strong trends.

4. How can I test a trading strategy?

You can backtest your strategy using historical data or practice on a VT Markets demo account before trading live.

5. Is news trading risky?

Yes, news trading can be volatile due to sudden price movements. Using stop-loss orders and analyzing market sentiment can help manage risk.