A long short strategy consists of selecting a universe of equities and ranking them according to a combined alpha factor. Technical strategies can be broadly divided into the mean-reversion and momentum groups. The term trading strategy can in brief be used by any fixed plan of trading a financial instrument, but the general use of the term is within computer assisted trading, where a trading strategy is implemented as computer program for automated trading. 'paper trading') where they are tested in a simulated trading environment. They are usually verified by backtesting, where the process should follow the scientific method, and by forward testing (a.k.a.
Trading strategies are based on fundamental or technical analysis, or both.
Bad money management can make a potentially profitable strategy unprofitable.
The main reasons that a properly researched trading strategy helps are its verifiability, quantifiability, consistency, and objectivity.įor every trading strategy one needs to define assets to trade, entry/exit points and money management rules. In finance, a trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets. Plan for achieving returns from a financial marketplace