Trading Strategy

AAA

DEFINITION of 'Trading Strategy'

A set of objective rules designating the conditions that must be met for trade entries and exits to occur. A trading strategy includes specifications for trade entries, including trade filters and triggers, as well as rules for trade exits, money management, timeframes, order types, etc. A trading strategy, if based on quantifiable specifications, can be analyzed on historical data to project the future performance of the strategy.

INVESTOPEDIA EXPLAINS 'Trading Strategy'

A trading strategy outlines the specifications for making trades, and includes rules for trade entries, exits and money management. When properly researched and executed, a trading strategy can provide a mathematical expectation for the specified rules, and help traders and investors determine if a trading idea is potentially profitable.

RELATED TERMS
  1. 90/10 Strategy

    An investing strategy that involves deploying 90% of one's investment ...
  2. Trading Plan

    A systematic method for screening and evaluating stocks, determining ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Trade

    A basic economic concept that involves multiple parties participating ...
  5. Forecasting

    The use of historic data to determine the direction of future ...
  6. Backtesting

    The process of testing a trading strategy on prior time periods. ...
Related Articles
  1. Options & Futures

    Backspreads: Good News For Breakout Traders

    This bullish trading strategy offers unlimited potential profit with limited risk.
  2. Trading Systems & Software

    Interpreting A Strategy Performance Report

    These key performance metrics will help you decide if your trading strategy is a winner.
  3. Active Trading

    Top 10 Rules For Successful Trading

    Whether you're a novice or an expert, these 10 rules should be the backbone of your trading career.
  4. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  5. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  6. Investing Basics

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  7. Stock Analysis

    A Trader's Look at the S&P 500

    Moving averages are sending an important signal, and it's probably not what you think.
  8. Economics

    What is the Breakeven Point?

    In general, when gains or revenue earned equals the money spent to earn the gains or revenue, you’ve hit the breakeven point.
  9. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  10. Stock Analysis

    What is the Price-to-Sales Ratio?

    The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center