Strategy Trading---wiki

Trading strategy

In finance, a trading strategy (see also trading system) is a predefined set of rules for making trading decisions.

Traders, investment firms and fund managers use a trading strategy to help make wiser investment decisions and help eliminate the emotional aspect of trading. A trading strategy is governed by a set of rules that do not deviate. Emotional bias is eliminated because the systems operate within the parameters known by the trader. The parameters can be trusted based on historical analysis (backtesting) and real world market studies (forward testing), so that the trader can have confidence in the strategy and its operating characteristics.

Contents
1 Development
2 Executing strategies
3 Styles
4 Timeframes


Development When developing a trading strategy, many things must be considered: return, risk, volatility, timeframe, style, correlation with the markets, methods, etc. After developing a strategy, it can be backtested using computer programs. Although backtesting is no guarantee of future performance, it gives the trader confidence that the strategy has worked in the past. If the strategy is not over-optimized, data-mined, or based on random coincidences, it might have a good chance of working in the future.

Executing strategies A trading strategy can be executed by a trader (manually) or automated (by computer). Manual trading requires a great deal of skill and discipline. It is tempting for the trader to deviate from the strategy, which usually reduces its performance.

An automated trading strategy wraps trading formulas into automated order and execution systems. Advanced computer modeling techniques, combined with electronic access to world market data and information, enable traders using a trading strategy to have a unique market vantage point. A trading strategy can automate all or part of your investment portfolio. Computer trading models can be adjusted for either conservative or aggressive trading styles.

The publication of Trading Strategy Indices as investable indices that implement a range of trading strategies has become a growing business for many of the major Investment banks.

Styles
Mirror trading
Technical analysis
Fundamental analysis
Quantitative trading
Trend following
Mean reversion
Volatility (finance)
TradingLevels
Price action trading

Timeframes
Intraday
High-frequency
Scalping (trading)
Shaving (trading) - a round trip trade (a buy and sell) in as little as one second.
Momentum (finance)
Day trading
Trend following
Gorilla Trading - Buying near the closing bell and selling the next morning (holding a position overnight)
Long term trading
Short term trading
Trading Strategy Index