IMPORTANT STRATEGIES FOR STOCK TRADING
The most important strategy for stock trading is to make profit. So always put your money on stocks that move. Of course losses are part and parcel of the game at the stock market and the trick is in keeping losses to a minimum. So try to invest in stocks that are on the move and sell the minute the momentum slows down. At this point notional losses would be minimum and profits moderate to high.
To bring this strategy into practice traders should buy stocks which are just breaking out and are aimed at expansion especially in volume. Volume expansion indicates money flow into the stock and therefore profits are assured if exit is timed well. Increase in volume goads on the stock to move up wards. At the limited volume indicates limited expansion and limited upward movement. Thus care should be taken and stock analyzed carefully before investing. Breakouts happening with low volumes are usually short lived and unsuccessful.
Never trade due to boredom. Emotional trades are usually disasters in the happening and are best avoided. It is very commonly seen that people trade as a herd not knowing the pros and cons and sometimes not even aware of the share situation. This type of emotion while trading would lead to an increase in losses incurred. Emotions should be kept at bay and trading only done according to predetermined and chalked out strategy. Sticking to one’s strategy would definitely help tide over difficult situations. As the level of losses increase traders usually face a decrease in confidence level and this happens due to indulging in emotional trading
Try to keep losses as small as possible. Wealth accumulates from big winners and this is possible by minimizing losses. Thus every trader should try to remain invested in winners and cut losses as soon as they become visible or are indicated. It is a good practice to determine the time frame of every investment made. Thus this decision already indicates your exit timing and worry is reduced. Either swing trading or stock picks which ever works for individual traders should be selected in order to get the list of stocks that they are planning to invest in. This will also help in selecting the exit strategy.
Whatever the time frame keep risks small and keep a risk profile for every share invested in. day trading and swing trading strategies differ slightly even though the general strategy of maximum profits and minimum risks remain the same. In swing trades position size would be smaller since larger moves are anticipated. Stop loss orders should be placed wider since profit targets are far away and it is always wise to exercise patience in swing trading.
Day traders are looking for smaller moves hence their positions should be larger. Trading large size means that traders should employ tight stops since stocks get multiple opportunities to work. Day trading is more quick and so risks would be higher and caution should be the watch word.
Stock trading is an investment that has many risks involved. Trades should be planned in such a way that profits are maximum and losses minimum.