So you are on the look out for the best trading system huh? Well this is a lofty goal. One system that works for one person may not work for another person. A big percentage of trading has to do with your personal DNA. Some people are Ok with taking risks while others get sick to there stomach when risking some money. When searching for the best trading system you have to start out by looking at yourself and finding out what kind of strategy you want to start with.
There are many strategies you can use. Lets start by focusing on the 3 main types.
1. Day Trading –
This strategy is a newer strategy at least to the individual trader. This strategy gained popularity during the internet boom. Once people had access to there trading accounts online and transaction fees started to drop people were able to trade as much as they wanted whenever they wanted with out the hassle of calling there broker or spending tons of money in commissions. With day trading the idea is you buy and sell your shares within the same day. To day trade equities or stocks you need to have a balance of $25000 dollars in your brokerage account. There are many people have picked up this strategy and started day trading for a living. Many day traders use smaller time frame charts such as the 5 minute chart and trade patterns based on that time frame. If you can handle the stress and learn a good system this can be a very lucrative profession, but by no means is it easy.
2. Swing Trading
Swing trading is a strategy that is generally based on a daily chart and it is a system where you are looking to hold longer than a day and then ranging between a week to a month. With swing trading you are looking to get a few points based on the current trend or pattern that has shown up on the charts and ride the momentum until its gone then you exit your trade. Swing trading is a little less stressful since you are not looking at every single small tick that happens like you would do with day trading. Another pattern that is in between the day trading and swing trading is what is called Mini swing trading or short term swing trading.
3. Mini Swing Trading
This strategy is very similar to swing trading except usually the longest you would hold the stock would be 1 to 5 days. With this strategy it is a little more stressful and little quicker than the standard day trading however it can be less stressful than day trading. An example of this style would be if you are looking at a chart that has made a good recent move up followed by 1 or 2 days down you would look to get into this stock as soon as it showed some strength and then get out just below the previous highs it just made.
4. Long Term Trading or Investing
The strategy of long term investing has been around forever. This is where you look for a good company with good fundamentals and you purchase shares for the long term. Once you purchase the shares you let it go knowing that you are in for the long hall and that the little ebbs and flows don’t affect you because you have done your research and the company is set to grow for years to come.
Now these are the main types of trading techniques now what should you trade is another story. There are so many different things to trade that require different brokerage accounts and different minimums we will have to look at that in a different article. So for now whether you want to be day trading for a living or if you just want to manage your own money with a long term approach this is all something you have to figure out for yourself based on you and then come up with your own best trading system or best trading systems depending on what you think is best.