One of the biggest mistakes of novice day traders is to follow only one trading strategy.

Let me explain:

A trading strategy is either a trend-following strategy or a trend-fading strategy.

A trend-following strategy means that you buy when the market is going up and you sell when the market is going down. You follow the acumen of Jesse Livermore, the world's greatest trader, who once said: "Successful traders always follow the line of least resistance. Follow the trend. The trend is your friend."

When applying a trend-fading strategy you try to sell at the end of an uptrend and you buy and the end of a downtrend. Usually trend-fading strategies use oscillators to try to identify the end of a trend by looking for overbought and oversold situations. Or they look for important support and resistance levels and sell the resistance and buy the support.

A market can only move in three directions:

• Up
• Down
• Sideways

When a market is moving up or down, then you should apply a trend-following strategy, and when the market is moving sideways you will be more successful when trading a trend-fading strategy.

Therefore professional traders have at least two trading strategies: One for a trending market and one for a sideways moving market.

Depending on the market you might want to use different strategies for an uptrend and a downtrend. Here's an example: A stock usually falls twice as fast as it climbs up. Therefore you could use a different trading strategy for shortening a stock than for buying a stock. Just take a look at the following example of the Apple shares. It took Apple seven months to climb from $125 to $200, but only two months to drop back from $200 to $125.

If you use a different trading strategies for markets that are trending up and down, then the total number of strategies you need is THREE (incl. one strategy for a sideways moving market).

I personally like to use two different strategies for a trending market; a conservative and a more aggressive trading strategy. 

The conservative trading strategy is taking money off the table quickly, since I never know how long a trend will last. Especially these days markets can turn around on a dime. And keep in mind that as long as you are in a trade, your money is at risk. You can reduce the risk by getting out quickly and therefore shortening the time that you are in a trade.

However, some times the markets might trend for an extended period of time, and you want to take advantage of these longer lasting trends. In this case you need to apply a larger stop loss to ensure that you are not too early stopped out of the trade and therefore face a higher risk. But usually you will also get higher rewards since you realize larger profits in a longer trend. I would call this strategy a more aggressive trading strategy, since you have a higher risk and also try to shoot for a larger risk/reward ratio. When trading a conservative strategy, your risk/reward ratio might be 1:1.5, while you can apply a risk/reward ratio of 1:3 or 1:5 when trading the aggressive trading strategy, i.e. you try to make $5 for every dollar that you risk.

If you like to use a conservative and an aggressive trading strategy, then the amount of trading strategies that you need is either THREE or FIVE, depending on whether you use different startegies for uptrends and downtrends.

Summary:

As a serious trader, you will trade anywhere between TWO and FIVE trading strategies. 

How many trading strategies do YOU trade? - Leave a comment!