Six frameworks. No silver bullets.
Common approaches traders use to organize their decisions. None are inherently superior; each suits different temperaments, time horizons, and market conditions.
Trend Following
Identify the prevailing direction and ride it. The premise: trends persist longer than most expect, and a few large winners pay for many small losers.
Mean Reversion
Bet that extreme price moves will revert toward an average. Most useful in range-bound or oscillating markets where prices stretch and snap back.
Breakout Trading
Enter when price clears a defined level: a range, a triangle, a previous high. A true breakout signals the prior balance has broken and momentum will follow.
Swing Trading
Capture a single leg of a larger move. Combines elements of trend and mean reversion: buy pullbacks in uptrends, sell rallies in downtrends.
Scalping
Take many small profits from tiny price movements throughout the day. Demands speed, low transaction costs, and emotional discipline above all else.
Position Trading
The longest timeframe. Build positions based on macro trends, fundamental shifts, or secular themes. Closer to investing than trading.