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Strategies and risk

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Trading strategies

2-minute read

Your approach to the markets has a significant impact on how you trade. It dictates which strategies you use, how you manage risk and more.

In this course, we're going to cover how to pick a strategy for trading and risk that suits you. But before we get to that, you'll need to decide your trading strategy.

What's your trading strategy?
Types of trades
Differences at a glance

What's your trading strategy?

Every trader is unique and will have their own style. The chief factor in deciding yours is how much you want to trade, and how long you want to keep each position open.

Long-term traders, for example, tend to only take a few positions each quarter. They'll keep them open for months at a time, looking to earn 10% or more profit from each.

Day traders, meanwhile, are the opposite. They may take multiple positions each day, keeping them open for minutes or hours. Using leverage, they aim to profit from relatively minor market moves.

There are also short and medium-term traders, who fall somewhere in between. Or you might decide to employ a mix of a few different strategies – it's all about finding an approach that suits you.

Day trading	Short-term trading	Medium-term trading	Long-term trading
Trades multiple positions during the day	Trades few positions through the week	Takes only a few positions throughout the month	Takes only a few positions throughout the quarter
Typical trades last between minutes and hours	Typical trades last from 1 day to 1 week	Trades typically last between 2 weeks to a month	Trades typically last between 1 and 2 quarters
Looks to profit from small market moves	Looks to profit from market moves of 1% to 5%	Looks to profit from market moves of 5% to 10%	Looks to profit from market moves of 10% or more
Bases trades on technical levels and market news	Bases trades on technical levels and market news	Bases trades on both technical levels and fundamental analysis	Bases trades on both technical levels and fundamental analysis

Types of trades

As well as determining your strategy, your trading style will dictate which types of trades you employ.

With traditional investing, you can only open one type of trade – buying an asset over the medium to long term, and holding it in the hope that it earns you a profit. With leveraged products like CFDs, there are different types to suit different styles.

Here, we're going to cover two main types. Standard CFDs are ideal for shorter-term opportunities, while forwards may be better for longer-term ones.

What are daily CFDs?

Daily CFDs are trades that are intended to be kept open for short periods – from less than a day to a couple of weeks.

They have the tighter spreads than forwards but will incur an overnight financing charge if held open after the markets close.

Daily CFDs have no expiry.

What are forwards?

Forwards are meant for longer positions, from a few weeks to several months. With forwards, all overnight financing charges are incorporated into the spread. So the spread is wider, but you don't pay any overnight financing.