Every trading academy and trading courses talk about the importance of trading strategy, but why is trading strategy so important?
For example, when we were young, our parents taught us that we need to wait and observe the traffic before crossing the road, only when we summarise that crossing the road is safe then we proceed. This is one good example of the process of “stop, observe, and think”.
This principle is the same in the forex, commodities and cryptocurrency markets. If a fund manager only relies on their feeling and instinct to trade, most of the time their results are failures. Can you imagine the consequences of crossing a busy road without checking the traffic or traffic lights?
The trading strategy of VOLO Finance also implements this “Stop, observe, and think” concept.
Before our expert trading team made any trade decision, we would not enter the market blindly, we will observe the market with our “3 Technicals, 2 Analyses, 1 Volume” trading strategy.
When all 3 technical indicators, 2 analysis techniques (fundamental, sentimental) and 1 market volume flow matches with the current market trend into a market trend reversal opportunity, only then our traders will enter into the market for the reversal profit.
“Chasing the trend” refers to the act where some traders follow the market trend to buy long when the price rises, and sells short when the price falls.
This is one of the easier ways to follow the trend in the financial markets, but the margin for profit is very limited; because when the trend starts to appear on the candle chart, the bullish trend probably exhausting its power soon. Furthermore, if you chase the trend and enters the market, simultaneously the bullish trend ended its momentum and falls into reversal, you are stuck at the height of the price and start losing money.
“Buy the reversals” is a trading strategy that captures the reversal to maximise profit opportunity. For example, in a bearish market, our traders wait for the entry opportunity at a low price, aiming for the bounce back reversals to maximise the profit of our buy long position; or in a bullish market, it waits for the market to overheat and sell short at the height and wait to profit in the upcoming fall.
There are both advantages and disadvantages to “Chase The Trend” or “Buy The Reversals” trading strategies, however, our experts believe that aiming for the reversals is a better trading method with a higher profit-to-risk ratio. This requires patience and experience, sound judgment, good indicator tools, and risk management skills.
“Buying the bottom and finding the top reversals” requires very strict risk management. In VOLO Finance’s trading strategy for forex, commodities and cryptocurrency markets, every trade order will maintain the 8:2 rule for risk management, which means there must be an 80% profit margin and a 20% stop-loss limit. This is a safety measure if the stop-loss threshold is reached, then the trade position will be decisively closed with the smallest loss possible. Plus, the 80% profit margin roughly means 1 profitable trade can offset 4 losing trades.
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