Every active trader or investor dreams about profitable stock trading strategy. To make money you have to have strategy. The trick is to prepare different strategies for different possible market situations. The market is constantly changing its behavior so your strategies should be evolving constantly. Your stock trading system should adapt to the current market situation, and based on it you should decide what strategy is the best to use.
Where to start – In order to create trading strategy you’ll be needing access to the charts which reflect the time frame to be traded. Before you start, make sure that you are open minded and inquisitive, but without losing objectivity. Note your ideas on a piece of paper so you can have a neat list. Some of these ideas can later on become your strategy so don’t take them for granted.
Narrow the chart options – The next step is to narrow the chart options. You should decide are you a day trader, swing trader or investor. After you’ve done that, choose a time frame that is compatible to your needs. Is one-minute time frame right choice for you, or will you still opt for monthly time frame? The next choice you have to make is on what market you’ll trade: stocks, futures, forex, options or commodities?
It’s time to create – Although it seems like a lot of work to make your own strategy, after you have done it, you’ll be satisfied with the results, because it’s a lot easier to stick to your business plan if you yourself had made it. For a start you’ll need to determine a set of rules that will allow you to enter the market to make a profit. To figure out what works and what doesn’t, look for those similar examples and see what your risk would have been. Based on that, determine what should be your future trading plan. Use a basic trading strategy, and improve its performance with personal approach.
Analyze price movements on a regular basis, so you can adapt your strategy to them. One more thing you should adapt your strategy to, are market changes. To follow market changes use all of the advantages given to you by brokerages. For example, Equity feed features a lot of useful analyses of market and notifies you about changes, based on the product popularity on the media, and the growth of company stocks accordingly.
Don’t stick to one – You should adapt your strategies to current market conditions, market is constantly changing and it would be wrong to stick to one strategy if the terms of the market are drastically different. If you don’t change your strategies often, you can look for different tactics that work over short period of time. Keep track of all the strategies and tactics you use so you can create a trading plan. You can avoid certain strategy if you see that it’s not appropriate for those terms. On the other side when conditions favor some strategy, you can capitalize on it in the market.
All the help you can get – Use the past successful strategies to learn something. There are no guaranties that it will be a success again, but you definitely can study the causes and consequences and thus gain confidence in making business decisions. Besides that, use all the information that you can get from your broker or brokerage, about changes on the market, follow their predictions, but not blindly, be prudent in your choices of strategies and tactics.
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