Trading strategy
Trading strategy is a strategy that the merchandise trade or in trade with financial products in the long term the odds increase and loss risks is to prevent.
General
Trading strategies serve to achieve the set trading goals. States may, within their trade policy in foreign trade pursue trading strategies. In October 2015, the EU Commission's “General Directorate for Trade” presented a new trade strategy. The core of the trade strategy is to increasingly negotiate trade agreements or free trade agreements with all important trading partners . It turned out that countries with externally oriented trade strategies are more successful than countries that have sealed themselves off with protective tariffs or protectionist barriers. In the national trade in goods, trading strategies are used at all levels of trade ( wholesale , retail and mail order ). In finance trading strategies are closely linked to the risk attitude of the decision-maker connected.
Trading strategies can be derived analogously from game theory , where the strategy represents a behavior plan determined by the player before the start of the game , which includes the actions and omissions that - depending on the actions / omissions of other players and one's own actions - the next step (move) in the Game sets. The game strategy is very pronounced, especially in chess . Transferred to the trading strategy, this is determined before the start of trading and must plan one's own and expected foreign market behavior before making one's own decisions within the framework of the trading objective.
Trade in goods
The trade in goods develops market strategies within the trading strategy , for which a market analysis of market data is necessary in order to get to know market behavior and strategies of other market participants , to derive their own behavior from them and to use them for future market development .
The trading strategy includes the implementation of trading functions . In the case of the time-bridging or storage function, for example, it is part of the trading strategy of the trade to have sufficient storage capacity available in order to be ready for delivery at all times and to avoid delivery bottlenecks and shelf gaps . On the other hand, the idle costs for storage costs and overstock must be avoided.
species
A distinction is made between a total market strategy and a segmentation strategy :
- The total market strategy ensures that all relevant markets served and their target groups are covered .
- The segmentation strategy focuses on certain sub-markets or market segments .
Always have the range , the pricing policy and the choice of the form of operation and the operation type in the foreground.
economic aspects
The markets are trading company of their order fulfillment business objective of profit maximization is essential. Trading strategies serve to achieve this corporate objective. That is why market observation with subsequent market cultivation is an important success factor . The sales chain must be kept free from operational disruptions by optimizing the distribution logistics . Trading strategies also aim to avoid inventory and sales risks . This reduces the risk of out of shelves and overstock.
Finance
In finance, trading strategies (also: trading strategies ) for market participants such as investors , brokers , securities dealers , investment funds , credit institutions , pension funds , traders or insurers form the basis for their buying and selling decisions on the financial markets . Over the years, numerous trading strategies have emerged in the financial markets, so that every type of investor has to find the right strategy for their risk attitude. None of them are optimal from the start; all have their advantages and disadvantages. Market participants should stick to a strategy they have chosen once and not change it every time they lose.
species
From the multitude of existing trading strategies, the most important ones should be mentioned:
- In the value-oriented strategy ( English value investing ) according to Benjamin Graham , the investor acquires shares in companies that he considers to be undervalued compared to their intrinsic value and sells shares that he considers to be overvalued.
- The pro-cyclical trend-following strategy ( English Trend Following strategy ) aims a certain trend to recognize and profit-taking advantage by when prices rise ( bullish bought) and falling ( bear market is sold).
- The volatility strategy ( English volatility strategy ) is betting big volatility to recognize and call options and subsequent put options with the same maturity to use.
- The countercyclical contra-trend strategy ( English counter trend strategy ) assumes that there is, for example, in upward movements (bull) to profit-taking, falling which the courses and encourage the purchase. Conversely, selling quickly during a bear market to prevent major losses.
- The buy and hold strategy is the most static trading strategy. It aims, once bought commercial properties to keep long in stock ( english held to maturity ), such bonds until their maturity .
These strategies also employ hedge funds in their hedge fund strategies , but they show a high risk appetite .
Among other things, the following are derived from this:
- The covered call or buy-write strategy is one of the best-known derivative trading strategies in portfolio management . It consists of buying ( long position ) an underlying asset (such as shares ) and selling a call option ( short position ) on this underlying asset and is often used by pension funds or insurers as a trading strategy for their portfolios .
- The opening price strategy compares the opening prices with the closing prices of the previous day and derives trends from this. With seasonal trades strategies , certain days of a year ( position trader ) or hours of a day (day trader ) are filtered out, on which there is a high probability that price developments repeat themselves, which can be exploited profitably.
- In carry trading and position trading , a risk position is held for several days or even months, in contrast to day trading, which must be concluded on the same trading day.
- This includes the high-frequency trading ( English high-frequency trading ) driven by short holding periods and high trading volume is marked.
- Noise trading is based on the strategy that buy, sell or hold decisions are not made on the basis of fundamental data , but rather on the basis of rumors and herd behavior .
Electronic trading strategies
Trading strategies are supported above all in finance and here in particular on stock exchanges ( commodities or securities exchanges ) or in over-the-counter trading by electronic trading systems such as automated trading ; this form of trading is known as electronic trading . A distinction is made here between the search strategy and the trading strategy . In the case of securities orders, the search strategy pursues the goal of filtering out a subset of securities or specific securities of a stock exchange segment as well as a subset of potential counterparties from the totality of all market participants in an electronic trading system. The trading strategy, on the other hand, provides additional order dimensions in addition to the stock market price and quantity.
economic aspects
All buy, sell and hold decisions must be in line with the trading strategy being pursued and aimed at avoiding mistrades . The larger the Sharpe ratio , the more successful the trading strategy. Risk arbitrage and risk diversification , which goes back to Harry Markowitz , specialize in dealing with market risks , both of which can be incorporated into trading strategies.
Fundamental Analysis Trading Strategies
Typical trading strategies of technical analysis
The typical technical trading strategies can be divided into the following classes:
Trend follower
Trend-following trading approaches try to enter existing price trends. You get out again as soon as the trend "breaks". Because it is naturally impossible to recognize a trend before it has developed, trend followers are often called “free riders”. They accept not doing the entire movement, but just part of it. Trend following has nothing to do with techniques based on attempted anticipation of trends.
Trend following systems became known in the managed futures scene through successful traders like Richard Dennis or William Eckhardt . The turtle trader system gained worldwide fame through the spectacular story of an experiment in the early 1980s . It was first fully disclosed and published in 1993.
Pullback
A pullback trading system waits for an opposite movement in an existing trend and then moves in the direction of the trend.
Channel breakout
A trend channel is defined. If the courses leave the channel, the system enters accordingly.
Cycles
This approach assumes that there are cycles in the price movement. So there are z. B. seasonal fluctuations in the prices of raw materials . Well-known examples are the 6-phase model by Leon Levey or the " Egg of Kostolany ".
template
When trading patterns ( English patterns ), it is assumed that there are certain, is also available in the future repeating patterns in the price of a security, as market participants act in similar equal situations - such acceptance. Examples of classic patterns are triangle formations, flags, rectangles, double top and double bottom.
Strategies in high frequency trading
For high frequency trading, there are specialized strategies that take advantage of certain effects that occur on this very short-term time level.
Database
To operate and test trading systems, historical price data, possibly also volume data and company data of a security, are required. A distinction is made between different time frames: "End-of-Day" (EOD) data summarize a trading day in one data set. The so-called intraday data, on the other hand, have a resolution of hours, minutes or even ticks .
Web links
- Literature on trading strategy in the catalog of the German National Library
- Link catalog on trading systems at curlie.org (formerly DMOZ )
See also
Individual evidence
- ↑ Ludwig G. Poth, Gabler Marketing Terms from A - Z , 1999, p. 142 f.
- ↑ European Commission of October 14, 2015, Trade for all: Towards a more responsible trade and investment policy , COM497, p. 2 ff.
- ↑ Stephen Woolcock, EU policy on Preferential Trade Agreements in the 2000s , in: European Law Journal 20 (6), 2014, p. 718
- ↑ Press and Information Office of the Federal Government (Ed.), Bulletin , 1989, p. 244
- ↑ Manfred J Holler / Gerhard Illing, Introduction to Game Theory , 1996, p. 33 f.
- ↑ Ludwig G. Poth, Gabler Marketing Terms from A - Z , 1999, p. 142
- ↑ Christoph A. Scherbaum, This is how the stock exchange works , 2013, p. 110
- ↑ Michael Kaya, An Analysis of the Strategy Indices of Deutsche Börse AG , 2007, p. 69
- ^ Hermann-Josef Richard, Stock indices: Fundamentals of their construction and possible uses with special consideration of the German stock index DAX , 1992, p. 119
- ↑ Uwe Wagner, Traden wie ein Profi , 2013, p. 333 F22
- ↑ Sylvia Mieszkowski / Sigrid Nieberle (eds.), Unlaute: Noise / Gerausch in Kultur, Medien und Wissenschaft since 1900 , 2017, p. 346
- ↑ Peter Gomber, Electronic Trading Systems, 2000, p. 89 f.
- ↑ Peter Gomber, electronic trading systems , 2000, p 90
- ↑ Daniel Ruppert, Concepts for Measuring the Performance and Risk of Portfolios , 2010, p. 30