Trading strategies to try with a demo account

view original post

How adventurous are you with your trading strategies? For many, trading can become a routine. There is nothing wrong with this at all, especially if it works. However, diversifying strategies can see you gain income from unexpected places and may even turn out more lucrative. Below, we provide trading strategies you must try with a demo account.

Why use a demo account for trading?

Demo accounts come under a variety of names, including practice accounts or paper trading. Their purpose is to let you engage in real-world trading, without risking your capital and without making any actual profit. It provides you with fake capital to invest, so you can try strategies and techniques before losing money on trades.

There are several benefits using a trading demo account, both for new and experienced traders. For those new to the sector, a demo trading account lets people understand trading without risk. As they follow real markets, you can see what trading is like.

For those more experienced, it is a great way to try investments in new markets. Each market operates differently and it is a good idea to understand and practise before becoming a part of it. Even if you are experienced, you can use it to improve your weaknesses or enhance existing strengths.

What is a trading strategy?

A trading strategy is a specific plan that people use to make a profit while trading. Each can have a variation and focus on different aspects. Most of them use technical analysis, and they prevent a person from buying and selling aimlessly, which ultimately leads to losses.

All of these strategies require a lot of knowledge on the part of the trader, ideally of the markets and the area that is being traded-in. A demo account is a great way to try out some of the strategies listed below.

Swing trading

Swing trading is a technique that aims to take advantage of changes in financial momentum. This means they look for trends about to turn upwards and buy, or sell when they see trends about to fall. By getting the price on the swing of this pendulum, they get the best price in all outcomes.

To do this type of trading, the skill of being able to analyse markets is required. This helps predict the length in duration of each movement in the swing and if they are a part of bigger trends. Knowing the market picture is also helpful, as they can see if levels of supply and demand will cause these swings to happen.

With swing trading, stocks are usually kept for three days to three weeks. Thus, it is useful for someone who does not have as much time to designate, or who does not want to take the risks associated with day trading. One of its other advantages is that it can be deployed across a range of securities.

Day trading

Day trading is also known as intraday trading. It involves trading when a market opens and ceasing when it closes. In this period, stock and shares are bought and sold in rapid succession. As the market fluctuates, the day trader capitalises on the changes. When it closes, they close all trades so they do succumb to overnight volatility that they have no control over.

This is an all-or-nothing type of strategy, one that requires full-time dedication and the utmost knowledge of trading and the markets. Thus, it is quite good to attempt it using demo accounts first. Despite its intimidating nature, it can be fairly risk-free. There is no risk of overnight loss, and traders can limit risk with short-term trades that use limits. It also has a degree of flexibility, as people can trade on world markets that open and close at different times.

EOD trading

End-of-day trading (EOD) is a strategy that involves trading just as markets are closing. This is done by looking at the prices of the previous day. They then buy as it settles depending on how they think it will change.

It is a great way to get started in trading, as you only need to study prices at the start and end of the day. It can also take up less time as the traders only need to buy in the morning or evening. By using a series of orders, they can also limit the risk involved making it one of the safer trading methods.

Trend trading

Trend trading makes use of market momentum, to see how long downward and upward trends will continue for. This can be used to pick the optimum points at which to buy or sell. These are known as short and long positions. You take short positions when you think a market is going to go down further and a longer one when you think it will rise further.

There are many other trading strategies available. Some overlap and some can be used within others. It is also worth noting that one trade is never more lucrative or likely to succeed than any other. All investments carry a risk and you should take your time to study the markets and your strategy. Use a demo account to get used to it and you may find your new favourite investment method.