Do you often feel overwhelmed by the inconsistencies in your trading outcomes?
You’re not alone.
Many traders, even those seasoned in the field, stumble by neglecting the cornerstone of successful trading—a well-defined trading strategy.
Without it, even the most experienced can fall prey to emotional decisions and inconsistency. But there’s a better way.
So, to answer the title briefly, is there a trading strategy for sustainable long-term gains? Yes. With a mindset-first approach deeply rooted in the Mark Douglas principles, you can:
- Cultivate discipline and a deeper understanding of market probabilities and
- Achieve outcomes when you pair them with different trading tactics.
But before we dive deep into that, we’ll have a run-through of the popular trading strategies and their benefits. In addition, seasoned traders have verified and tested a unique trading approach, giving them long-term gains that will be unpacked.
What are the popular trading strategies?
There are four main trading strategies that traders and active investors use, and within these strategies, you can use different techniques to make the best trading strategy more effective.
1. Day trading: Short-term gains for active traders
Day trading involves opening and closing positions within the same day to profit from short-term price movements.
Here are the benefits and drawbacks of being a day trader.
| Benefits | Drawbacks |
| Potential for quick profits | Higher stress and time commitment |
| No overnight risk exposure | Increased transaction costs from frequent trading |
| Ability to take advantage of intraday volatility | Risk of overtrading and emotional decision-making |
| More frequent trading opportunities | Requires significant focus and discipline |
| Misses out on longer-term trends |
You can use these techniques as a day trading strategy to capitalise on short-term price movements within a single trading day.
| 1. Trend trading – Identifying intraday trends using short-term moving averages (e.g. 5-minute, 15-minute charts) – Entering trades in the direction of the established trend – Using momentum indicators like RSI or MACD to confirm trend strength – Setting tight stop losses and taking profits at predetermined levels – Exiting trades when the trend shows signs of reversal | 2. Range trading – Identify support and resistance levels forming an intraday trading range – Buy near support and sell near resistance within the range – Use oscillators like RSI or Stochastic to confirm overbought/oversold conditions – Place stop losses just outside the range boundaries – Take profits as the price approaches the opposite end of the range – Exit trades if a breakout occurs beyond the established range |
| 3. Gap Trading – Identifying price gaps between the previous day’s close and the current day’s open – Trading in the direction of the gap for continuation gaps – Fading the gap for exhaustion gapsUsing volume and price action to confirm gap direction – Placing stops beyond the gap level – Taking profits based on measured move targets | 4. Breakout Trading – Identify key intraday support/resistance levels or chart patterns – Wait for the price to break above resistance or below support with increased volume – Enter long trades on upside breakouts, while short trades on downside breakouts – Place stops just inside the broken level – Target measured moves based on the height of the pattern or previous range – Use momentum indicators to confirm the strength of the breakout |
| 5. Arbitrage – Identifying small price discrepancies for the same asset across different exchanges – Simultaneously buying at the lower price and selling at the higher price – Using high-speed automated trading systems to execute trades quickly – Focusing on liquid markets with tight spreads to maximise profits – Considering transaction costs and exchange fees in arbitrage calculations |
Day traders usually focus on shorter time frames for their trend identification compared to longer-term trend traders.
The key for day traders using these techniques is to act quickly, manage risk with tight stops, and have a clear plan for entries and exits within the trading day since they are also exposed to market volatility. Traders often combine multiple techniques and adapt their approaches based on current market conditions.
2. Swing trading: Traders for several days to weeks or holding trades for several days to weeks
Swing trading is a trading style that aims to capture medium-term price movements. Traders typically hold positions for several days to a few weeks to capitalise on price swings within larger trends or between support and resistance levels.
Many traders prefer swing trading because it balances the high-intensity, time-consuming nature of day trading and the long-term commitment of position trading.
Here are the benefits and drawbacks for comparison.
| Benefits | Drawbacks |
| Less time-intensive than day trading | Overnight and weekend market risk |
| Potential for larger profits per trade | Missed opportunities in long-term trends |
| Lower stress compared to day trading | Risk of sudden market reversals |
| Fewer trades, potentially lower transaction costs | Requires patience and discipline |
| Can be combined with a full-time job | Tied up capital for longer periods |
If you’re into swing trading, you can also use these techniques but with different outcomes and goals.
| Trend trading – Identifying medium-term trends using indicators like moving averages on daily charts – Entering trades in the direction of the established trend – Using momentum indicators to confirm trend strength – Setting stop losses below recent swing lows (for uptrends) or above recent swing highs (for downtrends) – Aiming to capture a significant portion of the trend movement | Range trading For range trading, swing traders: – Identify support and resistance levels forming a trading range on daily or weekly charts – Buy near support and sell near resistance within the range – Use oscillators like RSI or Stochastic to confirm overbought/oversold conditions – Place stop losses just outside the range boundaries – Take profits as the price approaches the opposite end of the range |
| Gap trading – Identifying significant price gaps between the previous day’s close and the current day’s open – Analysing the gap type (breakaway, continuation, or exhaustion) to determine potential trade direction – Entering trades based on the gap’s implications for future price movement – Using volume analysis to confirm the strength of the gap – Setting stop losses based on the gap level and recent price action | Breakout trading – Identify key support/resistance levels or chart patterns on daily charts – Wait for the price to break above resistance or below support with increased volume – Enter long trades on upside breakouts, short trades on downside breakouts – Place stops just inside the broken level – Target measured moves based on the height of the pattern or previous range – Use momentum indicators to confirm the strength of the breakout as part of their momentum trading |
Swing traders often combine these techniques, adapting their approach based on market conditions and the specific characteristics of the asset they’re trading.
The key for them is to have a well-defined strategy, manage risk effectively, and remain patient while waiting for high-probability setups to emerge.
3. Position trading
Position trading is a long-term strategy involving holding positions for extended periods, typically weeks, months or even years. If you’re a position trader, your goal is to profit from major price movements and long-term trends. With position trading strategy, you often focus on:
- Identifying assets with strong long-term potential
- Using fundamental and technical analysis to determine entry and exit points
- Holding positions through short-term fluctuations to capture larger trends
| Benefits | Drawbacks |
| Lower stress and time commitment compared to short-term trading | Exposure to longer-term market risks and volatility |
| Potential for larger profits from major price movements | Tying up capital for extended periods |
| Reduced transaction costs due to fewer trades | Potential for larger losses if trends reverse |
| Ability to capitalise on long-term fundamental trends | Missing short-term profit opportunities |
Position traders often combine the techniques below, using breakouts to enter trends, gaps to confirm momentum, and occasionally trading ranges during consolidation periods.
| 1. Trend trading – Identify the start of new long-term trends – Enter positions when prices break above resistance or below support levels – Hold positions as long as the trend continues – Use trailing stops to protect profits while letting winners run | Range trading – Identify assets trading in long-term horizontal ranges – Buy near support levels and sell near resistance levels – Hold positions for weeks or months within the range – Exit if a breakout occurs, potentially transitioning to a trend trade |
| Gap trading – Identify potential trend reversals or continuations – Enter positions after gaps that signal the start of a new trend – Use gaps as confirmation of existing trend strength – Set stop losses beyond key gap levels | Breakout trading – Identify the start of new long-term trends – Enter positions when prices move beyond established support/resistance levels – Confirm breakouts with increased volume and momentum – Hold positions as long as the new trend continues |
When it comes to position trading, the key is maintaining a long-term perspective and focusing on major price movements rather than short-term fluctuations.
4. Trend trading
Trend trading, also known as trend following, is a popular trading strategy that aims to capitalise on the momentum of established trends in the financial markets. It’s a versatile strategy because it can be applied across various timeframes, from short-term intraday trends to long-term multi-year trends, making it adaptable to different trading styles.
Trend trading involves:
- Identifying the direction of market momentum
- Entering positions in the direction of the trend
- Holding positions for extended periods to capture large price movements
- Exiting when the trend shows signs of reversal
Here’s a comparison of the benefits and drawbacks of this strategy
| Benefits of Trend Trading | Risks of Trend Trading |
| High profit potential | Vulnerability to reversals |
| Clear decision-making | False signals in volatility |
| Reduced market noise impact | Delayed entries and exits |
| Lower transaction costs | Potential large drawdowns |
| Multi-market effectiveness | Low win percentage |
Active traders and investors use trend trading and breakout strategies through the following:
| Trend trading or trend following – Use technical indicators like moving averages, MACD, and RSI to confirm trend direction and strength. – Look for optimal entry points when a trend is established and exit when there are clear signs of trend exhaustion or reversal. – Employ trailing stops to protect profits and let winning trades run, while also setting appropriate stop-loss levels to limit potential losses. – Experienced traders adapt their trend following approach to different timeframes, from intraday to long-term trends, depending on their trading style and goals. – Diversification is applied across multiple markets and asset classes to spread risk and capture various trending opportunities. | Breakout trading – Identifying key levels for significant support and resistance levels, chart patterns, or price channels to identify potential breakout points. – Use increased trading volume as confirmation of a genuine breakout, reducing the risk of false breakouts. – May enter positions as soon as a breakout occurs or wait for a retest of the broken level for additional confirmation. – Place stop-loss orders just below the breakout level for long positions or above for short positions to manage risk. – Set profit targets based on the size of the previous consolidation pattern or use trailing stops to capture extended moves. – False breakout awareness is important as seasoned traders may use additional confirmation signals or wait for the breakout to hold for a specific period before entering a trade. |
By combining trend following and breakout techniques, active investors and seasoned traders aim to capture significant market moves while managing risk easily.
These strategies can often be used in conjunction with other analytical tools and risk management practices to optimise trading performance.
So, now you’re equipped with the knowledge and techniques, the most important element is the trading mindset.
Integrate Trading Mindset and Strategy for Long-Term Gains
Most traders are always challenged by emotional decision-making and the pursuit of a consistent trading strategy. The trading mindset is not just an accessory—it’s a cornerstone.
The right mindset empowers you to align your mental discipline with your chosen trading strategy, fostering a synergy that can change your trading from a stressful endeavour into a pathway for consistent outcomes.
A disciplined trading mindset enables you to manage emotions effectively, which is crucial when faced with the stock market’s volatility.
Allow me to elaborate on my point:
- By adopting a mindset-first approach, you can better adhere to your stop-loss protocols and ensure that emotional reactions don’t dictate your exit strategies.
- This discipline is essential for maintaining the integrity of your equity curve, as it helps prevent significant drawdowns caused by impulsive decisions.
- Understanding price action and its implications within market trends requires a calm and focused mindset. By integrating a disciplined mental approach with robust trading strategies, you can identify optimal entry and exit points, enhancing your ability to capture profitable opportunities while minimising risks. This combination supports your current trading goals and fuels your long-term aspiration of achieving financial freedom.
- Trading with a mindset that prioritises patience and consistency over impulsive actions allows you to stick to your trading plan, even when market conditions seem unpredictable.
As you cultivate this mindset, you build confidence in your trading decisions, paving the way for a calm, confident trader and active investor.
Final Thoughts
Achieving success in trading isn’t just about having the right strategies—it’s about nurturing the mindset that complements those strategies.
At Share Wealth Systems, we understand the intricate balance required to excel in trading. We invite you to join our community and explore our SPA3 Investor program, designed to upgrade your trading skills through verified strategies and a focus on disciplined trading practices.
For those seeking personalised guidance, our trading coaching program offers mentorship and insights tailored to your unique trading journey.
Start transforming your approach today and take the first step towards mastering the art of trading with confidence and precision.
