Equity Trading Strategies

Here are a few common strategies I have seen, each with its own pros and cons.

Buy and Hold Strategy

Over the long-term, markets should rise. In July 2025, the FTSE 100 reached 9000 for the first time. Although I do not see 10,000 any time soon, it will one day reach this level. If you just want to buy a few shares and leave them, over the long-term, a well-balanced portfolio should increase.

Diversification is key. Putting all your capital into just banks could work or could fail. It only takes a new banking crisis or new regulations to slash the value of bank shares. 

Passive Income Strategy

My personal strategy is to find value in stocks that pay high dividends. If you are happy to ride the ups and downs of the markets, looking for stocks that pay inflation-beating dividend yields can pay well.

The key here is to monitor dividend announcements, changes to the frequency of payouts and look out for special dividends.

This website is excellent for those who follow this strategy: https://www.dividenddata.co.uk/ 

Tracker Funds Strategy

OK, this one is a fund and not a stock, but if you want low risk and to just mirror the index, you can try tracker funds such as the ISHARES CORE FTSE100 UCITS ETF GBP.  ISF 

This strategy is ideal when markets have reached their low points, such as at the end of COVID.

Beta  Strategy

A beta value (or beta coefficient) is a measure of a stock's volatility in relation to the overall market.  If you believe the market to be bullish, investing in stocks with a positive Beta might help you to outperform the market.

Interpreting beta values:

Beta = 1: The stock's price is expected to move in line with the market.

Beta > 1: The stock is more volatile than the market. If the market goes up by 10%, the stock is expected to go up by more than 10% (and vice versa). 

Beta < 1: The stock is less volatile than the market. If the market goes up by 10%, the stock is expected to go up by less than 10%. 

Beta = 0: The stock's price is not correlated with the market. 

Beta < 0: The stock's price tends to move in the opposite direction of the market. 

For example, when the market crashed after COVID, the FTSE 100 fell to around 5,500.  The rally was impressive and putting your investments into high-beta stocks would have proven highly profitable overall.

Value Strategy

This strategy ideally focusses on analysis of data, ratios such as price to book ratio, and interpretation. Please read the 'Valuations Tool' section of this website.

You want to find stocks that you feel are cheap.  As well as data, read the news and read articles on the companies you are interested in. 

Stop Loss Strategy

This is more of a risk management tool than a strategy, but this involves setting limits on your losses, for example 20%. Set up alerts to notify you if a bad investment reaches a point where you intend to cut your losses.

set your price at a level where you are comfortable with the amount you are willing to lose.  Not every investment works out the way you intended it to due to the fact that the future is hard to predict.

Only invest what you are prepared to lose.

Momentum  Strategy

This is when stocks seem to experience  obvious upward or downward trends. The problem is timing. It just takes an announcement and there can be big corrections and momentum is lost quickly. I will show you two examples.

This is Games Workshop  GAW . 

I lost out here. I have always found it strange that, in a cost of living crisis, how can a company that sells little miniature figures keep growing?

As you can see, it has a strong positive momentum.

The second example is Diageo DGE.  There are plenty of stories out there that younger people do not drink as much alcohol as the older generations and this could well be a factor in the declining share price. This decline has happened for at least a year. The thing to consider here is when will this decline stop or flatten out, and will it rise again? In  the below there is a spread of about 30%+.  There is also the 4% dividend to consider.

Just two examples of momentum strategies to consider. These are both FTSE 100 stocks. Despite the index going up, certain stocks still go down.