Plan for achieving returns from a financial marketplace
In finance, a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets.
The difference between short trading and long-term investing is in the opposite approach and principles. Going short trading would mean to research and pick stocks for future fast trading activity on one's accounts with a rather speculative attitude.[1][2] While going into long-term investing would mean contrasting activity to short one. Low turnover, principles of time-tested investment approaches, returns with risk-adjusted actions, and diversification are the key features of investing in a long-term manner.[3]
For every trading strategy one needs to define assets to trade, entry/exit points and money management rules. Bad money management can make a potentially profitable strategy unprofitable.[4]
Trading strategies are based on fundamental or technical analysis, or both. They are usually verified by backtesting, where the process should follow the scientific method, and by forward testing (a.k.a. 'paper trading') where they are tested in a simulated trading environment.[5]
^"Yale Champions Social Investing (Whatever That Is)". Bloomberg.com. 2018-10-19. Retrieved 2023-12-02.
^Hill, John (2020). Environmental, social, and governance (ESG) investing: a balanced analysis of the theory and practice of a sustainable portfolio. London: Academic Press, an imprint of Elsevier. ISBN 978-0-12-818693-0.
^Proctor, Clint. "Trading and investing are two approaches to playing the stock market that bring their own benefits and risks". Business Insider. Retrieved 2023-12-02.
^Nekrasov, V. Knowledge rather than Hope: A Book for Retail Investors and Mathematical Finance Students. 2014, pages 24-26. ISBN 978-3000465208
^"Day Trading Strategies: 4 Timeless Approach". DayTradeTheWorld. 8 November 2021.
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