Trading strategies: rules-based playbooks for stocks and crypto

What makes a strategy tradable

Every complete strategy answers five questions: What do I trade (market, liquidity filter)? When do I enter (the setup and trigger)? Where is my stop (the point where I'm wrong)? How do I exit with profit (target or trailing stop)? How much do I risk (position size)? If any answer is "it depends on how I feel", it is not a strategy yet.

Strategy comparison

1. Trend following

Idea: prices that are trending tend to keep trending. Example rules: go long when the 50-day moving average is above the 200-day and price closes at a 20-day high; exit on a close below the 50-day. Expect many small losses and a few big winners that pay for them.

2. Breakout trading

Idea: tight consolidation stores energy; a break on high volume often starts a new move. Enter on a close above resistance with volume at least 1.5× average, stop below the range midpoint. Filter out false breakouts by requiring a daily close, or by waiting for a retest.

3. Pullback (buy the dip in an uptrend)

Idea: join an existing trend at a better price. Wait for price to pull back to a rising moving average or prior resistance-turned-support, then enter on a reversal signal. Full rules in our swing trading guide.

4. Mean reversion

Idea: stretched prices tend to snap back toward an average. Example: buy when price closes below the lower Bollinger Band and RSI(2) is under 10, but only if the long-term trend is up; exit on a return to the 5-day average. High win rate, but occasional losses can be large without a stop.

5. Range trading

Buy support, sell resistance, while the range holds. Stop just outside the range. Stop using it immediately once the range breaks with volume, because that is when range traders get hurt.

6. Dollar-cost averaging (DCA)

Buy a fixed amount at fixed intervals. DCA is an investing method rather than a trading edge, but it removes timing stress and suits long-term exposure to broad ETFs or Bitcoin.

How to backtest a strategy

1. Write rules precise enough that two people would take the same trades.
2. Test on at least 100 trades across bull, bear and sideways periods.
3. Include fees, spreads and slippage.
4. Track win rate, average win/loss, expectancy, maximum drawdown and longest losing streak.
5. Forward-test with paper trading or tiny size before scaling up.

Avoid these strategy mistakes

• Curve-fitting: tweaking settings until the past looks perfect.
• Switching strategies after a few losses.
• Using a trend strategy in a range, or a range strategy in a trend.
• Ignoring position sizing: even a great strategy fails with oversized trades.

Frequently asked questions

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