The Most Popular Trading Strategies in 2022

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In 2022, more people are getting involved in the stock market than at almost any other time. The trend is particularly pronounced in major economies such as the US and UK, where the number of so-called retail investors entering the market for the first time has skyrocketed over the past couple of years.

This trend has partly been driven by the historic stock market gains that we saw in 2020 and 2021, although these have since been thrown into reverse thanks to current global volatility.

Another major factor has been the massively increased accessibility of stocks and shares. Thanks to smartphone apps such as Robin Hood, Vanguard, Ameritrade, and even PayPal, anyone can buy stocks in major companies in just a few seconds.

For those attempting to strike out on their own with investing and trading, it is always worth having some kind of strategy in mind. We’re not here to make any recommendations, but we will draw your attention to some of the most popular trading strategies used by retail investors today if you’re looking for some inspiration. 

News trading

One of the main drivers of stock prices is market sentiment. Market sentiment is often impacted by the news cycle. For example, you might have noticed how Netflix stock recently took a dive after headlines broke that the company had lost more than 200,000 subscribers in a short time period.

For news traders, their buying and selling decisions are based entirely on the news and the expectation of news. For example, if Bloomberg reports that it is highly likely that the Fed will raise interest rates, you can usually determine which sectors will benefit or lose from this decision and execute a trade accordingly. 

Swing trading

Did you know that you can also make money from stock if the price falls? By “shorting” the stock, you can bet against it and directly profit from any losses. Some traders take advantage of this by betting on both sides, in a practice known as swing trading.

With swing trading, you time your buy and sell orders accordingly to the peaks and troughs of the market. You can usually do this automatically, setting a “buy” order when you expect an asset price to rise and a “sell” order when you expect it to fall. This is a highly technical form of trading that usually requires the use of analysis charts to detect price patterns as they arise.

Martingale trading

Martingale trading is essentially the gambling approach to the stock market. In fact, its origins lie in the most famous of casino games, roulette. As this online roulette guide explains, Martingale is an old-school strategy in which you attempt to recoup your losses by doubling your wager after each losing bet. Conversely, you half your next wager after a winning bet.

In roulette, this best applies to even-money bets, such as red or black. In the stock market, the same often applies. This guide from CFI explains how Martingale strategies are usually applied to trades with a 50:50 outcome, or as close to it as you can get in the financial market. It’s high-risk and not for everyone, but it remains a very popular approach to trading. 

Trend trading

On many trading floors, there is a saying that goes “the trend is your friend”. The philosophy behind this is that, if you can identify a trend as early as possible, just keep buying into it and watch your investment grow. For example, you might have noticed that Tesla stock has begun to consistently rise.

Your candlestick charts might indicate that this trend is likely to be sustained, and that future indicators look promising. In this case, you would just invest in Tesla with the expectation that, at least in the short term, its stock price will continue rising. Likewise, if you can spot the early beginnings of a bear trend, you would sell your holdings in that particular asset.

Scalping

This is a very time-consuming strategy that is also high-risk and has often been depicted in movies about the financial industry such as Rounders and Floored. With day trading, you make dozens of trades in a single day, hoping to capitalize on incremental price changes in a given asset throughout the trading day.

You would typically enter and exit the same position over the course of the day, timing your trades so that you make profits from each rise and fall. Since the price movements are so small, traders either have to open up very large positions on their own or enter a leveraged trade, where the broker “loans” them the money to open a larger position than they would normally be able to afford. 

These are the most popular trading strategies used by retail investors today. All have their merits and drawbacks, and some are more popular than others. You can try them out to see which is right for you.

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