Objective trading ideas and techniques?

<p>Objective trading is also referred to as rule-based trading, and it is the simplest way to trade. The trader follows a clearly defined set of rules for trade entry, exit, time frame, order types, and markets. It is designed more like a “set it and forget it” automated trading system. The trader merely waits until his criteria are met for initiating a trade. He takes a position in the market, and then enters “take profit” and “stop-loss” orders to manage his eventual exit from the trade. After that, it is pretty much a matter of just letting the trade play out, either hitting his profit target or being taken out of the trade by his stop-loss order being triggered. His trading strategy may have rules for adjusting profit targets or stop orders in accord with market action. However, he will usually be much less active in that regard than a subjective trader.</p>

<p id="isPasted">1. Trend Following</p><ul><li>Idea: The market price, once in a trend, is more likely to continue in that direction than to reverse.</li><li>Technique: Use technical indicators like moving averages (e.g., a buy signal when the 9-day EMA crosses above the 20-day EMA) to confirm and follow the trend. Positions are held for weeks to months, and a trailing stop-loss is often used to lock in profits as the trend progresses. </li></ul><p>2. Mean Reversion</p><ul><li>Idea: Asset prices tend to return to their historical average or "mean" over time after a temporary deviation.</li><li>Technique: Use oscillators like the Relative Strength Index (RSI) or Bollinger Bands to identify overbought or oversold conditions (when prices move too far from the average) and take a position anticipating a return to the mean. This strategy works best in sideways or range-bound markets. </li></ul><p>3. Breakout Trading</p><ul><li>Idea: When a price moves decisively beyond a defined support or resistance level, it often signals the start of a new, strong trend.</li><li>Technique: Identify key support and resistance levels. The entry trigger is a candle closing beyond these levels, ideally confirmed by high trading volume to avoid false breakouts. Stop-loss orders are placed just below (for a long position) or above (for a short position) the breakout level. </li></ul><p>4. Momentum Trading</p><ul><li>Idea: Assets experiencing strong upward or downward price movements are likely to continue moving in that direction in the short term due to market psychology and herd behavior.</li><li>Technique: Focus on high-volume assets using momentum indicators like the Moving Average Convergence Divergence (MACD) or RSI to time entry and exit points. </li></ul><p>5. Quantitative and Algorithmic Trading</p><ul><li>Idea: Use mathematical models, statistical analysis, and computer algorithms to identify and execute trades based on predefined criteria, eliminating human emotion.</li><li>Technique: A simple example is statistical arbitrage, where an algorithm automatically shorts an overperforming stock and buys an underperforming, but historically correlated, stock, aiming to profit when their prices revert to their historical relationship. </li></ul><p><strong>Essential Objective Techniques</strong></p><ul><li>Rule-Based Entry and Exit: Clearly define exact conditions (e.g., indicator crossovers, price levels) that must be met to enter or exit a trade.</li><li>Risk Management: Predetermine the maximum loss per trade using stop-loss orders (e.g., the 1-2% rule, risking only a small percentage of capital per trade). Aim for a favorable risk-to-reward ratio (e.g., 1:2 or higher).</li><li>Backtesting: Test the strategy using historical data to evaluate its performance and identify potential weaknesses before risking real capital.</li><li>Trading Journal: Maintain a detailed record of all trades, including the rationale and emotional state at the time, to track performance and refine the strategy.</li><li>Automation: For fully objective strategies, computer algorithms can be used to execute trades swiftly and consistently based on the predefined rules. </li></ul>