To design an effective arbitrage strategy, you must first understand your trading strategy.
It’s important to identify what type of trader you are and what type of trading style you’re comfortable with.
When you have an effective trading strategy, you will have a better sense of direction during the trading process and will not panic easily.
This is very helpful for beginners.
1. Support and resistance Leaving the field at support and resistance levels is a fairly common strategy.
This is very popular in range trading!
A support level is a position where prices tend to find a certain level and reverse upward.
Generally speaking, prices tend to go up at this level.
However, if this support level is breached, prices may continue to fall until the next support level.
Resistance levels are where prices tend to meet resistance on their way up and are most likely to reverse to a lower level.
It is opposite to the support elevation.
That means prices are more likely to fall back from that level than break it.
However, by breaking this resistance level, it may continue to rise until the next resistance level.
On the long side, traders carry at the closest resistance level, while losing at the closest support;
On the contrary, when shorting to support the arbitrage level, and resistance to the point of loss.
2. Candlestick patterns The candlestick pattern has been built over time and traders believe it will repeat itself.
This means that market sentiment will react in the same way to the same market dynamics.
Generally to buy and sell momentum to confirm trend turns and breakthroughs.
The candlelight chart pattern helps traders identify trend turns and breaks.
When this strategy is APPLIED TO TECHNICAL ANALYSIS, SELECTING ENTRY AND EXIT becomes relatively more effective.
3. Exit Based on fundamental analysis Financial markets often give traders unexpected reactions to unexpected events and important news.
Let’s say the central bank makes a surprise decision that suddenly turns the market upside down, in a direction that’s not good for your trade.
In this case, manual departure is relatively safe.
Fundamental analysis takes into account interest rates, inflation and other indicators, including the trade balance, retail sales and employment data.
There are decisions, fiscal policy changes and political stability.
4. Trend Trading trend is the general direction of price changes in asset markets.
Trends fall into three categories: uptrend (bull, bullish) Downtrend (Bear, bearish) Parallel and no trend (lateral) There is no specific timeline to consider a direction as a trend, but the longer the direction lasts, the more reliable the trend becomes.
Trends can be identified using a trend line that connects a higher bottom in the upward direction, a lower high in the downward direction, or a convergent high and low in the horizontal direction.
Basically, traders can go long when the price trend is rising;
On the contrary, when the price gets lower and lower, you can short.
In any case, trends always have an end.
So traders can use trendlines and moving averages to identify price trends.
Moving averages help traders see if a trend will continue.
Generally speaking, when the short-term moving average is above the long-term moving average, it represents a bull market and a good opportunity for traders to go long.
5. Price divergence means that the price moves in the direction of the technical index, such as RSI, oscillator index or MACD.
These are powerful signals that allow traders to see through the potential for price reversals.
