The four core strategies
| Strategy | The idea | Works well in | Fails in |
|---|---|---|---|
| Trend following | Entering with an existing trend after a pullback | Clearly trending markets | Sideways ranges — conflicting signals |
| Level bounces | Buying support, selling resistance | A range with defined boundaries | Strong trends — the level breaks |
| Breakout | Entering on a break of a key level | After volatility contraction and major news | False breaks in quiet markets |
| Range trading | Repeatedly buying and selling between two bounds | Calm markets with no catalyst | The moment price leaves the range |
Note the "fails in" column: each strategy fails precisely in the environment where another succeeds. That is not a flaw but a definition — no strategy works in all conditions, and anyone searching for one will switch styles after every losing streak. More important than picking a strategy is knowing the environment it works in and refusing to trade outside it.
How to choose: start from your time, not the strategy
Ready-made lists present strategies and leave you to pick by taste. The more useful order is reversed: start from your real constraints — how many hours do you have? how large is your account? what does trading cost you? — then eliminate what does not fit:
| Your constraint | What it rules out | What remains viable |
|---|---|---|
| One evening hour | Scalping and range trading | Swing and trend following |
| A small account (under $500) | Any style needing wide stops | Short targets at small, disciplined size |
| A relatively high spread | Scalping entirely | Swing and extended targets |
| Low tolerance for volatility | Breakouts and news | Quiet ranges and higher timeframes |
When the constraints intersect, sometimes only one option survives — and that is a good result, not a poor one. A strategy you can actually execute beats the best strategy you have no time for. See style timing in detail in market sessions.
How to test a strategy before risking money
This step is missing from most lists, and it is what separates a strategy from a wish. Serious testing needs four conditions:
- Written, non-interpretable rules: entry condition, stop placement, target, and size. If you cannot write them in five lines, it is not yet a strategy.
- A sufficient sample: at least 30–50 trades. Ten cannot separate skill from luck.
- Change only one variable at a time. Adjusting stop, target and timeframe together tells you nothing about which mattered.
- Varied market conditions: a trend strategy tested in one trend has not really been tested.
And what you measure is not the win count alone but: average win versus average loss, and the longest losing streak — because you will actually live through it and need to know in advance whether you can withstand it psychologically and financially. Remember that demo results are optimistic by nature: execution is idealised and psychological pressure is absent.
Common mistakes when choosing a strategy
- Switching strategy after every loss. This prevents building any evaluable sample, and losing streaks are normal in every strategy.
- Combining two contradictory strategies — such as bounce and trend following on the same pair at the same time.
- Ignoring cost when evaluating. A strategy profitable before spread can be unprofitable after it, especially with short targets.
- Copying a strategy without its environment: what works on a daily chart with a large account can fail on M5 with a small one.
- Judging by outcome rather than adherence. First assess whether the rules were followed, then assess the rules themselves after a sufficient sample.
The most important limit: the strategy is not the edge. The rules around it — fixed size, a permanent stop, a written journal, and refusing to trade outside its environment — are what turn an ordinary idea into repeatable results, while none of them can rescue the best idea from chaotic execution.