In trading, a trading strategy is generally a predetermined plan which is developed to attain a certain profitable outcome by venturing into the financial markets. The reason that such a trading strategy aids investors is its objectivity, reliability, consistency, and verifiability. This is what a well-planned trading strategy aims at. But how does one formulate the most effective trading strategy? Are there any specific guidelines that can be followed in order for an investor to develop the besttrading strategy ? Let us take a closer look at these questions:

First, one should know that there are different types of trading strategies. There are two main types, the spread-bet strategy and the scalping strategy. The spread-bet strategy makes use of bets where the investor would not trade beyond the level of his or her account. On the other hand, the scalping strategy trades with small amounts of money per trade and makes big profits from small market movements. Basically, the scalper anticipates small market movements and makes his or her move accordingly.

Another factor that affects the development of the best trading strategy is the analysis of trading signals. These signals are basically generated by technical indicators such as the Fibonacci rule, volume-weighted RSI, trend lines, envelope patterns, etc. Trend-based trading strategies depend on the strength and consistency of the current trend. Accordingly, these strategies involve trading at the territory of longer time frames, such as the daily and weekly charts, whereas scalping strategies are generally executed within the range of the day or the week.

The success of a trading strategy largely depends on the ability of the trader to identify the right trading strategy, which is in accordance with his or her personality. There are different trading strategies suitable for different personality types. In general, the scalper and the short-term trader are more prone to enter into positions with high leverage. Traders who have the ability to remain calm in fluctuating market conditions and who are able to execute their stop-loss orders quickly are usually preferred by most professional traders. Although there are no absolute qualities that could define a great trader, some personality traits are common among all successful traders.

However, when it comes to automated trading strategies, the situation may vary. Some robots do offer consistent gains, but there are still other robots that experience losing streaks throughout the trading year. Before choosing an automated trading strategies, the trader must evaluate the capabilities of the robot as well as identify which trades bring in consistent profits and which trades are losing opportunities.

When choosing a trading strategy, the trader must also take into consideration the amount of volatility in the market. Volatility is the variation in price over the course of a trading day. Since higher volatility is typically indicated by large gains, it is usually better to avoid positions that have higher volatility. However, if the trader is willing to take on higher risk, they may find a position trading strategy that offers very large returns with lower volatility.