Developing an Profitable Trading Strategy

By | August 19, 2021 12:44 pm

Everybody wants to be a successful trader. While there are many strategies to become a successful trader,This article will discuss how to develop a solid trading strategy.

Traders need a trading strategy to avoid emotional trades. Trading strategies are necessary to avoid irrational actions during extreme swings in the stock market. It’s especially important to have a framework for trading

For every trade to take place there must be a buyer and a seller. Further, there must be agreement on price and volume.

You need to have a trading Strategy to earn money in Stock Market

Developing an effective strategy requires a clear understanding of your goals, your risk tolerance, the time you can devote to trading as well as the appropriate investment vehicles.

Full or part time trading?

Consider this: if you are going to be a full time trader, invest in your education as a trader. Successful traders have the potential to make impressive amounts of money and live a most impressive lifestyle. Most professionals spend years in expensive higher education and taking a continuous series of professional courses. They must invest a lot of time and resources before they can even begin to earn a decent income. A successful trader can develop a career with high rewards but it too has some costs. Just because you don’t need a degree doesn’t mean that a significant targeted education isn’t necessary.

That training cost money and you will be “employing” yourself.

To think that you can start trading without proper preparation is naïve and self destructive.

Not only does a trader need a comprehensive program of education on economics, investments and rules and regulations but also a program on how to trade.

Depending on several factors such as time available to trade, amount of capital and the personality of the trader, there are several main “styles” of trading.

  1. Position Trading is where you would hold your trades from a few days or weeks to a few months. This is ideal if you cannot watch the markets all day and want to avoid entering and exiting markets frequently. However, as markets become more volatile this is considered to be more risky as you are also open to adverse overnight movements and unpredictable events.
  2. Swing Trading is becoming increasingly popular as traders look to capture short term movements lasting from two to five days. Although this has more frequent trading activity than position trading, one can also look to profit from both the up and down movements of the market within a short period of time.
  3. Intra Day Trading is where you take shares/Stock for Intraday basis.You can hold it for a 5mins to few hours,but need to square of everything before the closing of trading day.
  4. Scalping is essentially capturing very small moves during the Day Trading timeframe but holding trades from as little as seconds to minutes. This would be suitable for professional traders rather than beginners.

All successful traders have learned that the key to their own success is to find a trading style that best suited their own personality. Deciding on which one of these styles is suitable for you is a matter of study and experimentation.

So guys find your trading type and develop a Trading strategy which is properly back tested.

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