What Are the Most Popular Strategies for Trading in 2021?

With skepticism, a trading strategy that would be especially suitable for stockholders or traders in 2021 is any alpha trading strategy.
Alpha is used in trading as a gauge of performance, indicating when a strategy, trader, or portfolio manager has beat the benchmark market return over some period.
Alpha trading strategies are one of the most popular strategies for trading in 2021. They usually classified based on two key criteria. The first is risk exposure and how well they manage risk. The second is returns in comparison to the risks taken as well as the average market or sector return  

Trading in 2021 – most popular trading strategies to follow 

1.  Value trading strategies 

Value investing strategies include buying stocks, indices, and ETFs that seem to be trading at prices lower than their book/intrinsic values. Value investment strategies involve filtering for stocks that seem underpriced or oversold.
One key assumption in this strategy involves the belief that markets overreact to good and bad news. When markets overreact to bad news, prices drop significantly lower than they should. This creates an opportunity for value investors to buy these financial assets at a discount.
The other key assumption in this strategy is that prices will eventually catch up with their fundamentals. That is, when prices drop significantly lower than the company’s true value, investors assume the prices will rise back up to match the true value. This is often true.

2. Momentum strategies for trading

This refers to a trading approach that studies historical price movement to speculate on future movement. Momentum trading strategies strive to identify price momentum and execute strategic trades in the direction of the momentum.
Momentum traders can be classified as short-term or long-term. Short-term momentum traders usually hold their trades intra-day or for a few days. Long-term momentum traders usually hold their trades for a couple of days to over a year.
These traders use a set of technical analysis tools to identify market trends, trend strength, overbought and oversold levels, support and resistance levels, chart patterns, and entry/exit levels. This includes moving averages, stochastic indicators, trendlines, among many other tools.
This approach assumes that a trend will continue the momentum for the foreseeable future until a certain price level is reached, a certain divergence figure is reached, or until a fundamental factor changes.
Popular momentum trading strategies include breakout trading, trend trading, swing trading, divergence trading, and Elliot wave trading.

3. Contrarian Trading Strategies (Countertrend)

This refers to a technical trading approach that studies market momentum, identifies weaknesses in the momentum, and executes trades against the prevailing momentum. The strategy assumes that financial markets overextend rallies and slumps and seeks to benefit from that. It also assumes that market prices are cyclical hence the end of one trend becomes the beginning of an opposite one.
Contrarian traders use similar tools with momentum traders. The only difference is that they go against the momentum while momentum traders follow market momentum. Contrarian traders track market weaknesses such as trend-line breaks, failure to break support/resistance levels, consolidations, reversal patterns, and fundamental shifts in factors supporting the prevailing trend.
Counter-trend traders in stocks attempt to predict market corrections. They use technical indicators to identify overbought price levels to short overextended bull runs. In Forex, they study country-specific fundamental factors that may influence a central bank to intervene in overextended currency rates. They know that when a currency is too strong, the central bank will intervene to make it weaker and vice versa.

4. Growth Investing

This strategy involves accumulating growth stocks to realize an alpha return. Growth stocks are shares of companies whose earnings are expected to grow at an above-average rate soon. Growth investors usually target young promising companies. This is like buying Tesla shares at $20 back in 2010 after its IPO.
Growth investing is highly attractive due to its verifiable historical alpha returns. However, the strategy bears an equivalent risk since young companies are untried and could fail to reach their presumed potential.
Growth investors usually target companies in rapidly expanding markets, rapidly expanding industries, new technologies, and companies with market-disrupting solutions. Common strategies involve purchasing stocks during their IPOs or direct listings, purchasing SPACs, or purchasing stocks of companies that just performed a merger or acquisition.
Growth stocks tend to have a relatively high P/E ratio since investors are willing to pay a higher premium for a share based on the future expectation of earnings growth. Recent growth stocks include Palantir, Doordash, Uber, Airbnb, Coinbase, X Peng, and Snowflake.
Growth investors pay less attention to the current price of a stock and put more emphasis on the future performance of the stock. This explains why the investors are willing to buy even when standard indicators indicate that the price is overbought.

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Conclusion – most popular strategies for Trading in 2021

If we learned anything from 2020, it is that nobody has the power to foretell the future. But traders may take comfort on the point that concentrating on their assets using the strategies above, their hold may be enough to meet their financial targets. You can learn more from the top 5 of the most popular Forex players…or see the Top 5 investment trends for 2021.
Alpha trading strategies, one of the most popular strategies for trading in 2021, can play a significant part in the mitigation of trading uncertainties over a portfolio, as well as bringing in returns. One general disadvantage is that alpha trading strategies cancel themselves in the long term because their increasing demand increases the prices of the underlying assets they select.
Different studies have depicted that alpha trading strategies have outperformed market indexes in a long-term perspective especially considering the investors who bought young growth companies after the dot com bubble.
Therefore, an alpha stock can be isolated from one of the above strategies to achieve stock diversification, optimum opportunity, and profits.