What is a Strategy in Trading?

A strategy is basically a set of rules defining when a trader should take action. Strategies include trade filters and triggers. All these actions and filters and triggers are based on indicators only.
Trade filters – As the name suggests, it filters out or helps in identifying the opportunities whereas,
Trade Triggers – Trade triggers helps in identifying when a particular action has to be taken place.
To understand this more clear, let’s take an example – A trade filter might be a price that has closed above its 250 days average. This is the condition set by trade filter which sets the stage for trade trigger. This means a trade would be triggered if the price reaches one tick above the bar of 250- days moving average.
Just FYI, a strategy is not only when the price is above the moving average, or with any other technical indicator, etc. That would be too elusive and doesn’t provide a clear picture assisting in decision making.
Given below are a set of questions that need to be answered for a good working, reliable strategy:
1. What moving average to be used in calculation with length and price point?
2. How far the price needs to move above the set moving average?
3. What should be the entry point? As soon as the price moves above moving average or at the close or open of the next bar?
4. What order type to be selected while placing the order i.e., Limit or Market?
5. How many shares do you want to trade?
6. What are money management rules?
7. When to exist or exit rules?
We believe all these questions need to be answered and successfully answering all these can lead you to create a trading strategy.

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