Investopedia Trading Strategies
Last Updated on April 18, 2023
The advent of the internet saw the rise of many online publications, some of which focus on business and finances. One of the early entrants in the online financial education business is Investopedia, but what does it actually offer?
Founded in 1999, Investopedia offers online financial education by explaining financial terminologies and trading strategies. It aims to simplify investment decisions for its readers through education, enabling them to manage every aspect of their financial life. The website provides investment dictionaries, advice, reviews, ratings, and comparisons of financial products such as securities accounts.
Want to know more about Investopedia and the trading strategies it publishes? Read along!
What is Investopedia?
Founded in 1999, Investopedia is a financial media website that provides investment dictionaries, advice, reviews, ratings, and comparisons of financial products such as securities accounts. It offers educational technology in day trading, asset management, and foreign exchange markets. The firm also offers self-paced, online financial educational courses from expert instructors via its Investopedia Academy and hosts a stock market simulator.
With its headquarters in New York City, Investopedia is part of the Dotdash Meredith family of brands owned by IAC. The firm is on a mission to simplify financial decisions and information to give readers the confidence to manage every aspect of their financial life. So far, the site has more than 32,000 articles and reaches 20 million unique monthly viewers and posts paid advertisements as investing information.
Who is the typical Investopedia reader?
Investopedia gets millions of readers from all over the world and from all walks of life. While some are learning about money and investing for the first time, others are experienced investors, business owners, professionals, financial advisors, and executives looking to improve their knowledge and skills.
So, a typical Investopedia reader can be anyone who is interested in learning about investing and trading strategies posted on the website. They could be young college graduates who are trying to learn how to start investing early or retirees looking for the most suitable investing strategy for their stage in life.
What is a trading strategy?
A trading strategy is a specific plan put in place by an investor/trader for buying and selling securities, aimed at generating a profitable return on the investments. It is a systematic approach for buying and selling in the securities markets, which lists out risk tolerance, time horizon, investing objectives, and tax implications.
Trading strategies are based on predefined rules and criteria used when making trading decisions. The criteria can be based on technical analysis, macroeconomic factors, news and data, and so on. Whatever the approach, the key is to clearly define it and stick to it until its results are reviewed.
We have an almost unlimited profitable free trading strategies. Additionally, we provide subscribers and paying members a wide range of the best trading edges and courses via our shop.
25 most popular trading strategy articles on Investopedia (ranked by monthly visitors)
- Day trading strategy: This refers to buying and selling a financial instrument within the same day — or even multiple times over the course of a day — to take advantage of intraday price movements. Day trading can be profitable if you have a reliable strategy and stick to it. Without a well-planned strategy, the approach can be dangerous for both beginners and experienced traders. Moreover, not all brokers are suitable for such high volumes of trades due to high trading fees. You might also want to check out our day trading course.
- Scalping trading strategy: Scalping is a trading style whereby a trader aims to profit off of small price movements. The trades last from a few seconds to a few minutes, so a trader can make hundreds of such trades in a day. To have the slightest chance of success with scalping, the trader must have a strict entry and exit strategy, as one large loss could erode all the small gains made from other trades.
- Options trading strategy: Options trading are derivative contracts that give the option holders the right — but not the obligation — to buy or sell a security at a specified price (strike price) at some point in the future. To get this right, option buyers pay an amount called a premium to the option sellers. Some common options strategies include long calls, long puts, short puts, covered calls, Married puts, protective collar, and so on.
- Scalper trading strategy: Scalpers make several short-timed trades all through a trading day, with the aim of profiting from small market movements. They use different trading strategies, including multiple time frame analysis, moving average ribbon entry strategy, and relative strength/weakness exit strategy. Scalping is not suitable for every trader and not all brokers allow it. Scalping is a waste of time?
- Momentum trading strategy: The momentum trading strategy is based on the idea of selling losers and buying winners. The strategy seeks buying opportunities in short-term uptrends and then sell those assets when the securities start to lose momentum. The investor then moves the capital to new positions. Knowing when to enter into a position, how long to hold it, and when to exit requires a well-planned strategy and skillful execution.
- Bollinger bands trading strategy: The Bollinger Bands strategy indicator is a technical tool created by John Bollinger in the 1980s for gauging price momentum and volatility. It can be used in many ways: to check for overbought and oversold levels, as a trend-following tool, and for monitoring breakouts. Each trader decides which strategy to build with the Bollinger bands indicator.
- Fibonacci trading strategy: The Fibonacci tools are based on the work of Italian mathematician Leonardo Fibonacci, which identified a logical sequence of numbers that occur in many aspects of life, including the financial markets. You can use the Fibonacci tools to create a fibonacci moving average strategy that identifies hidden support and resistance levels you can use for entry, exit, and stop placement.
- Forex trading strategy: This refers to a technique a Forex trader uses to determine when to buy or sell a currency pair so as to have a high odds of making profits. It can be based on technical analysis, fundamental analysis, or news-based Forex market reactions. Whichever it is, the trader knows when and when not to be in the market.
- Pivot points trading strategy: The pivot point strategy is a measurement in technical analysis, which is used to determine the position of the price relative to its average the preceding day. It is calculated by taking the average of the high, low, and closing prices from the previous trading day. The price trading above the pivot point is considered bullish sentiment, while trading below the pivot point is considered bearish sentiment.
- Options day trading strategy: There are different options trading strategies for day traders, but generally, they come under “call” and “put” contracts. A call option gives the buyer the right to buy the underlying asset in the future at a predetermined price (strike price). On the other hand, a put option gives the buyer the right to sell the underlying asset in the future at the strike price.
- Volume trading strategy: Volume is the quantity of an instrument bought and sold each day. Traders use it to determine the overall supply and demand characteristics of a financial instrument, which can be useful in predicting its future direction. There are many indicators for tracking volume, such as the On-balance Volume and Money Flow Index, and traders build strategies around them.
- Turtle trading strategy: This refers to a trend-following strategy Richard Dennis and William Eckhardt taught some randomly picked traders in their famous Turtle Experiment in the 1980s. The strategy involves buying stocks or futures that are breaking out above their trading ranges and selling those that break out to the downside.
- Binary options trading strategy: Binary options are options contracts with only two possible payoff options — a fixed amount or nothing at all — when the contract is held until expiration. Often, a binary option is structured with a simple yes or no proposition: “Will this instrument trade above a certain price at a certain time?”
- VWAP trading strategy: The volume-weighted average price (VWAP) strategy is derived from a ratio of the average share price of a stock to the total volume of its shares traded over a particular period. Day traders use it to evaluate the current price of a stock and determine whether it is relatively overpriced or underpriced, which will inform their trade entry or exit.
- VIX trading strategy: VIX offers investors a broad view of real-time greed and fear levels in the market. Developed by CBOE, the indicator shows the market’s expectations for volatility in the next 30 trading days. Traders use it know when institutional traders are anticipating a market downturn so they can exit the market or switch to short-selling.
- Grid trading strategy: This strategy is used to take advantage of normal price volatility by placing buy and sell orders at certain regular intervals above and below a predefined base price. In a range-bound market, a trader could place sell limit orders above a median value and buy limit orders below to take advantage of the ranging market condition. Buy and sell stop orders can be used in anticipation of a trending market.
- Price action trading strategy: This refers to a trading method whereby a trader analyzes the history of price movements on a chart without the aid of technical indicators and uses that to make trading decisions. Traders who use this method try to identify trends and support/resistance levels and delineate them with trend lines and horizontal lines respectively. They then watch the reaction of the price at certain key levels to determine whether to enter or exit a trade.
- Golden cross trading strategy: The golden cross is a technical analysis signal that is seen on a price chart when a short-term moving average crosses above a long-term moving average. It indicates a potential price reversal from a downtrend to an uptrend, so traders often go long when it occurs, in anticipation of a major rally. The Golde Cross is the opposite of the Death Cross strategy.
- Heikin Ashi trading strategy: The Heikin-Ashi strategy uses the average of price data to create a Japanese candlestick chart that reduces the market noise, making it easier to identify the trend. However, some price data are lost with the averaging method, which could affect a trader’s risk management.
- Moving average trading strategy: Moving average strategies are technical analysis indicators that continuously calculate the average of the price as new data comes in. There are different types, including the SMA, EMA, WMA, and so on. The averaging period determines how fast the moving average line is. Traders can use a combination of moving average indicators or different periods to formulate a trading strategy.
- 5-Minute trading strategy: This strategy looks for a momentum burst on the five-minute chart. It relies on exponential moving averages and the MACD indicator. It is mostly used by Forex traders to trade reversals and it helps them stay in the position as prices trend in a new direction. But the strategy can also be employed in futures and equities.
- High-frequency trading strategy: This refers to a trading method that seeks to open hundreds and thousands of trades in a day, taking advantage of different opportunities that appear in the market, including arbitrage opportunities, market making, and so on. The strategy is mostly employed by prop trading firms and hedge funds.
- On-balance volume trading strategy: The on-balance volume strategy is a volume-based technical indicator that estimates the buying and selling pressure by adding volume on days when the market rallies and subtracting volume on days when the market closes lower. Traders use it to build trading strategies.
- George Soros trading strategy: George Soros uses a global macro strategy and speculates on different assets, including equity, fixed income, currency, commodities, and futures markets, in various countries across the globe. He is a renowned contrarian trader who seeks out market booms and bursts.
- Swing trading strategy: This is a trading style that attempts to capture the various price swings on the daily chart of a stock or any other asset. Swing trades last over a period of a few days to several weeks, and traders primarily use technical analysis to look for swing trading strategies. This style of trading sits in the middle of the continuum between day trading and position trading. One of the demerits of swing trading is that it exposes a trader to overnight and weekend risk, where the price could gap at the opening of the next trading session.