Anyone who has set out on the journey to become a serious trader knows they have to be realistic, set goals and work diligently to achieve those goals. Though the road will be different for everyone, becoming a successful trader begins with determining the strategies that will deliver you the best profits. Much like standard investing, there are a variety of trading strategies that can be used by those who want to make a profit for their own portfolio.
From options strategies to managing risk, this basic guide will explain how to begin trading stocks, exit strategies, and much more.
Keep a trading journal
Keeping a trading journal is an important way to improve your trading skills if used the correct way. In general, trading journals should include all the trades you’ve taken in the past, reasons for taking the trade, and their respective entry levels, stop-loss and take-profit levels. Your journal should also include any information you may find helpful to reference at any time.
Get the timing right
When it comes to things like options trading, profitability is all about the right timing. Get in too late and you risk paying too much, get out too late and you risk losing your profits.
The best options trading strategy gives you an accurate prediction of a stock move before it happens so you can get in before the crowd. It also gives you the exact timing and duration so you can pick the right entry and exit point to make the most potential profit out of the trade.
In his Certus Trading education courses, professional trader and educator Matt Choi teaches his students different trading strategies to get the most return on their investments. Choi says that the most successful traders use some form of technical analysis, or “quantify everything they see into rules.
Find the right stocks to trade
In this market environment, location is key. In other words, traders need to know where to look for momentum trading opportunities. Jason Bond, a trader who left his job as an elementary school gym teacher to trade professionally, says there is success in small- and mid-caps. This trading teacher provides “how to find stocks to trade” and more trading information in his student-focused training sessions.
Devising a plan to effectively manage risk is vital to your success as a professional trader. This will ensure you only lose what you can afford. Without a solid risk management plan, your time as a day trader could be extremely short-lived.
Know when to stop
If your strategies aren’t working, don’t keep throwing money at it. The bottom line is, strategies fall in and out of favor over different time frames. Go back to the drawing board and think again. If you can’t stick to your plan, don’t sit on it, you’ll only start on a dangerous slope, and there’s no money at the end of it.
Create your own strategy and test it on a time frame that suits your preference. Most importantly, make your trading approach fit your own personality and goals.