The 7 Best Trading Strategies That 100% Work Compared

Trading strategies that actually pay dividends are often difficult for new traders to decipher, as they’re shrouded in individual trader’s experience, insistence, and particular circumstances.

That said, it’s not hard to narrow things down to at least several broad strategies that are common because they can produce overall net profit. Here we’ll look at 7 trading strategies employed by many traders in many types of markets, using a diversity of instruments.

Key Facts: Best Trading Strategies

• Trading strategies match individual experiences but common ones are widely used.
• Main strategies include day trading (no overnight positions), swing trading (holding for days/weeks), and scalping (quick, minor gains).
• Others are trend trading (following asset momentum), support and resistance (based on price limits), news trading (using current events), and gap trading (exploiting daily price differences).
• Developing a strategy involves knowing your motivations, time, goals, risk tolerance, and market interest, then refining based on these.
• Effective strategies minimize fees, adapt to market conditions, utilize trading tools, learn from experience, and focus on high risk/reward ratios.
• The best strategy depends on personal preferences and goals, with no universal best.
• Beginners might start with day or swing trading based on their risk tolerance and time.

Short list of viable trading strategies

1. Day trading, as the name implies, is a trading strategy that sees traders open and close all trades by day’s end. Traders don’t sit on securities overnight (exposing themselves to price fluctuation risks).

2. Swing trading implies that a trader will sit on a position for days, weeks, or even months to generate profits from a shift in price.

3. Scalping is typically a day trading forex market strategy, where traders will move in and out of trades in a matter of minutes or seconds, looking for small gains of a few pips (often as low as 5 but up to 20 pips in a trade).

4. Trend traders and trend channel traders trade with the momentum of an asset moving in a particular direction. As long as their technical analysis says that a trend is forming or happening, they’ll take a position that will profit them from an overall price direction.

5. Support and resistance trading develops strategy from the apparent limits of the market’s price range (support levels are where price habitually stops falling and moves back up, and resistance levels are the ceilings beyond which prices normally don’t move, but rather turn back down). 

6. News trading is a strategy that employs breaking news about currencies, equities, and other markets to anticipate trade entry and exit.

7. Gap trading refers to a strategy exploiting the price differences between the closing price of the previous day’s trading, and opening price the following day.

The 7 best trading strategies with high success rates

Day trading

Day trading refers to the many strategies of traders who buy and sell assets within the same trading day, looking to profit from daily (very short term) price movements.

The stock markets, futures, and forex markets are typical haunts of day traders, and no matter their particular strategy, they are all day traders as they will not sit on positions overnight.

Day trading can employ various strategies and indicators, but whatever the nature of your trading, you’ll close your positions by the close of business on the same day.

The fundamental idea behind day trading is to buy at a low price and subsequently sell at a higher price, a few minutes or a few hours later.

Day Trading example

Let’s say you buy 50 shares of a stock at $20 each, which is the price per share as you enter the trade at 12:30 pm.

Although the stock price initially dips around 12:45 pm, your homework pays off and your hunch is correct－by 13:00 pm the stock has risen substantially, and continues to do so.

You’ve set your take-profit for, say, $40/share, trying to double your money because you believe the price will really jump today, so just before 13:00 pm, you’re auto-closed out of the trade, and have made a very respectable $1,000 profit.

Day traders are capitalizing on the day’s sentiment and buoyancy (or pessimism), and aren’t concerned with long term trends for the purposes of their trades－they’re in and out of numerous plays in a single day.

In our experience, day trading suits a certain disposition. If you like short bursts of intensive data analysis against a backdrop of staying up to date with market news, and you want to be able to shut your laptop and move on whenever it suits you, elementary day trading might be just the style for you.

Pros of day trading	Cons of day trading
✅ Simplified entry into the markets	❌ High risk of substantial volatility losses
✅ Substantial profit potential	❌ Demands time-intensive focus
✅ Flexibility in trading (mobile, independent)	❌ Psychologically stressful
✅ Quick and decisive trades hone analytical skills	❌ Incurs frequent associated costs, eroding profits
✅ Typically liquid markets are chosen, allowing for easy entry and exit

Swing trading

Swing trading also anticipates price movements, but over a far more substantial timeframe.

Swing traders look for news or many other indicators that demonstrate a substantial and persistent price movement over the next few days, weeks, or months－something that is unlikely to be derailed－and buy and hold for the duration of the trade.

Swing trade example

Let’s say you’ve read in the economic calendar that the CCP is building and equipping a new foundry and associated works in Shanghai, covering more than 50 acres, and that the primary end product will be armored copper cable.

You look at the commodity of copper and realize its price has been stable but sluggish, and anticipate a substantial uptick in price because (a) the Shanghai factories will require massive electrical installations that involve finished copper (electrical) products and (b) they will be buying copper ore in renewed bulk as soon as the factories are online, projected to be within 8 weeks.

As a swing trader, you’re happy to buy into that potential and wait for dividends. As you do (let’s say buying an options contract with the underlying asset being copper, pure and simple), copper is trading at  $3.14 per troy ounce.

Although mining houses that anticipate supplying Shanghai initially flood the market with ore, causing the price to slump to $2.85 per troy ounce, the factories come online on schedule and embarrass suppliers, as Shanghai is more than doubling its usual daily ask for copper ore now that the foundry and associated works are at full capacity. 

This results in copper experiencing a substantial uptick, reaching $3.86 per troy ounce and, based on your options contract’s strike price and term, you can close out well in the money, having anticipated copper reaching $3.74 per troy ounce within 12 weeks. 

We find that swing traders are normally those who enjoy indulgent, deep research and analysis, are at home looking at historical charts and determining current trends, and eschew the daily stresses that come with day trading.

On the flip side, swing trading faces its own challenges－the temptation to cut your position in panic or greed (as prices dip substantially or bigger potential looms) can demand strong emotional mastery and steely discipline.

Pros of swing trading	Cons of swing trading
✅ Flexible time commitment	❌ Losses or stop-loss outages on the back of market noise
✅ Potentially significant profits	❌ Overnight (longer term) risks of bad news or other disruptive forces
✅ Versatile trading strategy for all markets	❌ Requires a certain skill level in technical analysis and determining trends
✅ Solid risk management through stop-loss orders and position sizing	❌ Requires strict emotional mastery to hold for the duration
✅ Comparatively reduced psychological stress	❌ Although not as frequent as day traders’ costs, fees and other costs still erode profitability, especially in very short term swing trades

Scalping

Scalping is surely the fastest pace a trader can adopt, with the 1-minute scalping strategy being one of the most popular.

Scalpers will employ major indicators to identify mean reversals and trends, most often relying on the EMA and stochastic indicator to identify profitable long and short setups.

Scalping example

A classic scalping trade example sees you eyeing a security of whatever nature, anticipating its price movements.

Using the 50 and 100 period EMA, you see that the 50 EMA crosses above the slower 100-minute EMA, signaling a short term uptrend, and you buy in and go long for just a moment, capturing profit.

Similarly, when a cross is plotted beneath the 100-minute EMA, this signals a short term downtrend in the market, and you can short the situation for a minute or two to capture profits.

Another common approach is to employ the stochastic indicator (with period settings of 5, 3, 3). As an oscillator, it will pinpoint overbought conditions when it crosses above a value of 80.

Likewise, if its value crosses under 20, scalpers take this as indicative of oversold conditions, and get in and out on the subsequent price movements.

While all this might sound pretty formulaic, and though scalping dramatically reduces the time exposure (and thus risk) in individual trades, markets kick and jerk all the time, and nothing is guaranteed for the scalper more than any other trader.

Scalpers do nonetheless often employ larger position sizes than other types of traders, and they’ll offload them after smaller price movements, preferably within the shortest possible time.

Scalping is a strategy that seeks profit off small price movements, and it relies on constant technical analysis (EMA, stochastic, MACD, and candlesticks), and a consistent exit strategy to accrue a net profit.

Pros of scalping	Cons of scalping
✅ No need for fundamental analysis	❌ Extremely demanding, almost reclusive focus
✅ Technical analysis can enable very quick trade setups	❌ Technical analysis cannot deter volatility or other sudden market movements
✅ Risk is spread across innumerable trades in a day	❌ Losses can be substantial too, arising from a series of limited-analysis-losing-trades within a day
✅ Accumulated profits can be substantial after a day’s trading	❌ Associated costs (fees) can be substantial, which can badly erode net profit
✅ Depending on position size, a large return can be made by offloading many shares for cents in profit a few minutes or even seconds after buying	❌ For US-based traders, your trading account will need to be in excess of $25,000 to avoid being flagged as a pattern day trader (PDT)

You’ll find scalpers enjoy the extremely quick strikes the methodology demands, happily making a quick buck or moving quickly past a loss.

We find that scalpers are those who enjoy wholesale immersion in the markets every day, and they tend to make it a 9 – 5 position, cooling off only on weekends, and they enjoy the high-volume-low-margin business model.

Trend trading and trend channel trading

Trend traders will determine uptrends (higher highs and higher lows) and downtrends (lower highs and lower lows) through technical indicators, and trade with the trend in their favor.

Trend trading means capturing gains by analyzing an asset’s momentum in one or the other direction (when an asset’s price is heading persistently up or down, regardless of intraday fluctuations, this is known as a trend).

Trend trading example

As an example, let’s assume that you notice a stock (a computer chip maker) that is showing signs of an uptrend, and technical analysis confirms that all of the pointers are there, and you seem to be well poised at the early stages to go long.

Moreover, you’ve read that the Chinese are embarking on a massive robot manufacturing exercise, hoping to release millions of humanoid robots for a variety of functions within the next 5 years, and this particular chip maker is suddenly taking vast orders to supply.

Both the news data and technical analysis can be taken to confirm the start of an uptrend, and you’ll set a stop loss and take-profit level, watch the RSI to signal entry and exit, and trade with the trend in your favor.

Often called price action traders (although there are many price action strategies under that umbrella), trend traders become trend channel traders when the trendlines can be extended beyond 3 price points to denote a continuing trend.

Finding yourself in a channel allows you to more easily identify buying and selling points when charting.

Once drawn, trendlines that become a channel (up channels, down channels, or sideways channels) reinforce various strategies that take advantage of a confirmed trend, offering trend/channel traders the kind of data they need to determine entry and exit points for profitable trades.

Pros of trend trading	Cons of trend trading
✅ “The trend is your friend”, and trading with the trend provides a measure of surety other strategies lack	❌ Reading a trend’s genesis is not an exact science, and false signals confuse things
✅ A great strategy for most assets and markets, providing constant opportunity for trading	❌ Trend trading cannot hope to capture all the moves markets might experience
✅ Simplifies decision making and trade entry and exit	❌ Stressful, and somewhat time consuming, especially if you want to position yourself at a trend’s beginning, where things might still go either way

Support and resistance trading

Support and resistance traders take the demonstrated support (bottom price line) and resistance (top price line) as a given to enable entry points.

Support and resistance traders understand that support and resistance can be fixed or dynamic, but nonetheless operate within a relative ‘safe zone’ between these two price levels.

Support and resistance trade example

As an example, you might note that an asset’s price movements have for months been curtailed by certain highs and lows－points beyond which the price struggles to move, notwithstanding the price fluctuating regularly.

This then gives you the comparative surety that, supposing the price is again approaching its typical resistance level, the rally will run out of steam at around the usual turning point (or the decline in price towards support will be arrested by an uptick in demand).

This will allow you to place trades at the pivot point with relative surety, as without any new information predicting otherwise, established support and resistance levels are unlikely to be breached.

Support and resistance traders take the support level as indicative of an equilibrium, where supply and demand are balanced, knowing that prices will typically head upwards as people vie for purchase of the asset, only to hit a resistance some time later, whereupon the price will head back down to stoic reality.

Within this paradigm, and notwithstanding breakouts and other disruptions of the usual levels, support and resistance traders employ a variety of strategies anticipating that the levels will hold (range traders, for example, trade markets with no discernible trends, looking for buy/sell opportunities as the price oscillates within the support and resistance range).

Support and resistance levels are identified by looking at historical price data, noting where prices have bounced up or headed down on multiple occasions. The EMA and trendlines, along with other technical indicators, are most usually employed to identify possible support and resistance levels.

Pros of support & resistance trading	Cons of support & resistance trading
✅ Identifying support and resistance is straightforward, and the strategy is easy to use	❌ Support and resistance levels remain historical data, and markets guarantee nothing
✅ It allows traders to anticipate price movements with greater surety	❌ The levels are subjective, and interpretation remains individual
✅ The arena comes with clear entry and exit points	❌ Levels can’t forewarn against breakouts
✅ Low-stress trading, often lasting days or weeks as prices oscillate	❌ Difficult to manage stop loss orders and accrue an actual net profit in certain markets

The basic strategy of support and resistance level traders is to buy when prices hit the support level, and sell when prices hit resistance.

We’ve found that traders who enjoy the yo-yo nature of markets, as well as having attained a reasonable skill and experience level, favor trading off the support and resistance lines.

News trading

News trading consumes breaking news－gleaned from the economic calendar or other media－in order to position yourself for the anticipated market reaction.

News or events that impact a country’s industrial or other socio-economic status will typically lead to price movements in the markets.

News traders will anticipate the fallout from good or bad news or events (earnings releases or upcoming earnings analyses, dividend payouts, mergers and acquisitions, employment statistics, GDP revisions, geopolitical ruckus) and place trades accordingly.

Today, social media also has a hand in disseminating news that traders pick up. “Buy the rumour, sell the news” is an old news trading adage, and points to the basic strategy－position yourself when you hear the rumour of impactful news or see it approaching on the economic calendar, and sell for a nice profit once it breaks and the price moves.

Of course, this assumes that the price will gain momentum in the direction you anticipated, and this isn’t always the case, but news trading allows you substantial management of risk, as you can limit your position size, tighten up stop loss orders substantially, and even straddle the asset (buy both a call and put option), dumping one or the other as you move into profit in one direction.

News trading example

As an example, you hear that agricultural reports for the entire USA are due in the month of November, and everything you’ve read to date indicates that crops are particularly good this year across the board, and also that standing orders from existing clients are likely to fetch top price per tray for the more exotic fruits and vegetables.

You see a prominent commodity brokerage/shipping firm is set to boost its forward order book substantially going forward, delivering the US agricultural produce to global destinations, and its recent earnings analysis reflects this too.

You’ll go long on the freight company’s stock (anticipating an uptick in price) a week or two before harvest officially starts, and sit and hold the stock for a few weeks as its operations come up to full capacity, and its potential earnings for shareholders keep rising.

You might set a take-profit point or ride the wave with a ratchet check in place (if the stock retraces its climb by a certain percentage, you’re closed out with the profit you’ve made to date).

This is the essence of news trading－not just staying up to date with economically important news, but extrapolating the news into likely ramifications for prices.

News trading isn’t always plain sailing, however. Scheduled news releases are the stuff of economic calendars, with at least a week’s warning, and such news often doesn’t generate trading opportunity (quarterly earnings, other economic data releases, even central banks’ interest rate fiddles).

Unexpected or other sudden news that impacts economic standing is the news that no one sees coming (geopolitical conflicts, declarations of war, defaults on debt, weather tragedies, terrorist attacks－known in trading parlance as “black swan” events) and this kind of news demands immediate and deft positioning from news traders.

News traders most usually set up alerts for their current interests or holdings, as well as assets of interest that they suspect, based on aggregated news over time, might be due for a sharp or at least worthwhile price movement.

Pros of news trading	Cons of news trading
✅ Ability to capitalize on definite, announced data	❌ Cannot account for volatility due to unexpected market reactions to news
✅ Develops the skill of being able to capitalize on unexpected news too	❌ Time consuming, requiring constant research
✅ Ability to be ideally positioned at the very start of price movements	❌ It takes time to understand what regular news moves markets, and to what extent, forcing traders to deal with a lot of non-starters
✅ Ability to manage risk with stop loss orders and position sizing

In our experience, news traders very often find the pace (it varies from daily to far longer term) and nature of news trading highly rewarding, and there’s no denying that, depending on your trading balance and tempo, news trading can seem like a far safer trading strategy that can pay very substantial rewards at times.

Other traders find news intel quite flat, as they prefer technical analysis and working daily with the cut and thrust of market movements to trade profitably, pointing out that ‘waiting for good news’ seems a passive strategy that ignores the time value of money ($10 today beats $100 next week).

Gap trading

The ‘gap’ referred to by the name ‘gap trading’ is the difference between the closing and opening price of a forex pair or other asset.

Gap traders are looking to exploit price differences between one day’s closing price and the following day’s opening price, such gaps often being the result of overnight news.

As a gap trader, you need to anticipate whether the day’s opening gaps will fill, or whether prices are going to continue in the direction the gap has opened towards, and full gaps and partial gaps denote different likelihoods and levels of risk. 

Gap trade example

Say, for example, you see that a company’s stock you’re holding has opened a full gap up on its closing price the following day. It’s usual to wait an hour for the movement to be confirmed in either direction before entering the trade, but if you feel it’s a confirmed price adjustment, you’ll buy in, setting your stop loss near to the previous day’s closing price.

Having taken the gap as a signal, you find that the price keeps moving up a little every hour and, whether or not it continues all day, by shifting your stop loss in tandem behind it, you’re already in the money.

Many gap traders anticipate positions by looking at end-of-day signals－an increase in volume (whether stocks are gapping up or gapping down) is taken as a good indication that the movement will continue the next day in the direction of the gap.

Gapping stocks that cross above resistance are taken to be particularly reliable entry signals and, for shorting stocks, when the gap down dips below the support level, gap traders anticipate setting their short trades for the following day.

Pros of gap trading	Cons of gap trading
✅ Allows you to profit from fairly frequent, sudden shifts in market sentiment	❌ Limited signal strength, combined with the temptation to place trades before the movement is confirmed
✅ Gaps can corroborate other technical analysis, and confirm existing trends or signal possible trend reversals	❌ Market manipulation or illiquidity can account for many gap opportunities, which sees you trading a gap that is actually about to fill
✅ Successful gap traders are in at the start, maximizing profits and riding price movements for all they’re worth	❌ Comparatively limited trading opportunities
✅ Spotting gaps benefits many other aspects of technical analysis, enabling diverse strategies	❌ High volatility risk

How to develop a trading strategy?

In order to become a successful trader, you’ll need to pick a strategy (or strategies) you’ll learn and habitually adopt in your personal trading against the backdrop of other prime considerations.

When you understand that all of the trading types mentioned above can pay dividends, and that various trading strategies suit different personality types based on personal predisposition, then it’s easy to see why some personal considerations form the first and main platform for trading at all.

Put differently, your motivation for trading needs to be clear. Peer pressure or a desire to seem financially savvy are always poor reasons to enter trading, and you need to identify what it is that got you interested enough to start to learn to trade the markets.

Based on this initial consideration of why exactly you want to trade at all, the next obvious consideration is how much time you can and are prepared to give to trading. 

Your time commitment and skill level go hand in hand－there’s no way to avoid spending the time needed to become familiar with trading the markets (in trading, completing a course is arguably the best spent time, because it propels you into the markets with the information you need far sooner than ‘figuring it out along the way’).

What are your trading goals? Are you trying to make the rent each month, or slowly ease your way out of employment into full time trading? What are your weekly, monthly, and long term goals in trading?

Tied closely to this, is how much capital you have to start trading. It needs to be completely disposable, because imagining you’ll double the rent money in a week is a common fantasy that simply leads novices to tears－the markets are mercenary and unforgiving, and no one should be trading with money they can’t afford to lose, period.

Your appetite for risk comes right alongside your trading kitty, because you will risk your capital every time you trade. You need to figure out your personal acceptable risk (how much you’re prepared to put into any one trade) and what level of risk exposure you’re comfortable with (high or low risk).

As a general rule, most trading schools advocate that you trade with but a few percent of your trading account balance. Indeed, 4 – 5% is seen as unnecessarily risky, and 2 – 3% of your total kitty in a trade is deemed far more sensible trading.

You’ll also need to figure out some initial risk management rules (stop loss settings, extent of technical analysis points, etc.), although these can be refined to better suit specific strategies you might favor, once you’ve narrowed these down.

You’ll also need to do some homework on what markets are available, and figure out which markets appeal to you, developing an inkling for what instruments you might favor too.

Then and only then, can you look at strategy type specifically, and between all of the above considerations and your growing understanding of the diverse strategies employed by traders, you’ll soon get to a starting point where personal preparedness, market type, and strategy come together, allowing you to run a demo account initially, until you feel ready to very cautiously start live trading.

So, when talking trading strategy, we tend to think of day trading, scalping, or trend trading as the quick answers, and they are strategies to be sure, but a trading strategy starts with your trading plan, and that comes well ahead of jumping into any particular type of trading activity.

In a nutshell:

• Be clear about your rationale and market ideology
• Educate yourself on strategies and results
• Pick a market you favor
• Choose a preferred time frame and your analysis tools
• Drill down to refine your entry and exit signals
• Define your risk tolerance and management
• Start cautiously, preferably with a demo account that will quickly iron out the wrinkles in your approach and get you ready for live trading

Tips & tricks

Lowering trading fees and overall costs is one of the most persistent nags of retail traders, and it starts with choosing the right broker.

Your needs, based on your trading goals, will be variably met among the pool of available brokerages, and you should take the time to shop around and make a shortlist from which you’ll choose your service provider, because in that process you’ll identify where you’re getting the best deal.

A basic checklist when looking for a brokerage would include:

• Comparing services offered, including access to markets and instruments
• Looking at the trading platforms offered and the available trading tools
• Deconstructing pricing structures, including minimum deposits, account maintenance fees, or inactivity penalties
• Leverage and liquidity options

It’s worth noting too that optimizing your trade execution will also curtail trading costs (weighing up market conditions for the extent of volatility and liquidity, the types of orders you place, and your position size).

Moments of high volatility, poor liquidity, and other atypical market conditions can widen your spreads, result in order execution delays, and make you the victim of slippage (where there’s a drag between your closing price and actual takings).

Charting and other trading tools are part and parcel of the trading arena, and it’s easy to presume an ease in building and reading charts, but this is a fallacy, and one of the best time investments you can make as a new trader is investigating and understanding trading charts.

Likely the best “trick” in the book, however, is an open secret, and that is to lean on an experienced trader for essential instruction, so that you enter the markets with the fundamentals in place.

One of the biggest differentiators between profitable traders and those that go nowhere for years, is an understanding of CRV (risk/reward ratio). While it’s a common misconception that the CRV refers to the probable success of your next trade, it actually refers to the ratio between the risk you are taking and your potential profit from the trade.

CRV outlines exactly how much you can expect to gain for the amount you are risking in a trade. For example, a CRV of 10 means that for a (possible) profit of $10, you risk $1.

From this it’s easy to see how crucial CRV is in every trader’s game plan, although a significant percentage of traders misconstrue it, or fail to factor it in at all. Smart newcomers or seasoned traders wishing to up their game would do well to learn the trading strategies with high CRV on Witzel Trading.

Conclusion: Develop your own strategy

There are many trading strategies that can be profitable for disciplined traders, and when comparing the few mentioned above, no doubt some will ring as good options for you personally, and some won’t.

There is no “right or wrong” trading strategy, only the pursuit of profit in trading, thus any strategy that pays consistent dividends is a good strategy.

While the popular notion of trading being an easy walk-in kind of pursuit is still perpetuated by innumerable YouTube videos and other social media posts, the reality is that the level best traders take the time to learn their trade.

The sooner you develop your skills as a trader, the sooner you can legitimately pursue profits with a wholesale understanding of the markets, trading strategies, and likely outcomes.

We encourage you to learn from those who have been through the mill and sorted out every possible detail along the way－join us at Witzel Trading, and we guarantee you’ll come out well ahead of the pack.

Frequently asked questions on Trading Strategies: