Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to develop your stock trading strategy

InvestorEducation / Learn to Trade Aug 06, 2020 - 12:56 PM GMT

By: Submissions

InvestorEducation

Developing a trading strategy from scratch might seem an impossible task for the rookies. But if they know the common terms at trading, they can do so like a pro trader. The successful traders love to use their trading method as it syncs perfectly with their personality. You can buy the most expensive trading method in the marketplace, still, you won’t feel comfortable since the strategy is designed based on someone else personality. The developers design the system in such a way that it syncs with the personality of the developer.

We all know no one shares the same personality. So, those who are looking to become a profitable stock trader must learn to analyze the stock markets with their trading method. Let’s see how we can create a trading system like a pro.


Open a paper trading account

You might be wondering what the heck the paper trading account is. The paper trading account is nothing but a demo account. The reason you should open a paper trading account is to test your trading skills. Most traders don’t have any idea about how this market works. So, if they open a real account, they will be always under heavy pressure and this will create an unnecessary threat that will limit the profit factors to a great extent. For the betterment of your trading, you must eliminate the unnecessary stress. Open the paper trading account so that you don’t have to worry about the losses. Try to sync with the market so that you feel comfortable with this profession.

Start taking the trades

Before you intend to develop the trading method, you should start taking the trades without having any knowledge. Explore the features of the trading platform so that you can learn the use of root tools. It might seem tough at the initial stage but once you learn to use the tools professionally, you will feel more comfortable with your trading approach and this will allow you to make better decisions at trading. You might think trading is a very complicated task but it’s not. It is the easiest thing once you know the use of the premium tools available on the platform.

Developing a simple edge

To buy the shares, you must develop a simple edge. Instead of focusing on the indicators, focus on the raw price data. The elite traders always suggest the rookies trade the market with the help price action trading method. The price action method can be incorporated into any form of system and it can significantly improve the win rate for the traders. After you learn to take trades at the trend line, channel, Fibonacci retracement level, it’s time to incorporate the price action signals. With the help of the price action signals, the traders will be able to improve the skills to a great extent. Most importantly, they will know when to close the trade when things go wrong.

Developing the recovery plan

Everyone thinks about the trade execution plan. Very few traders are smart enough to emphasize on the exit trading method. Even if they do, they think about the potential stop loss. It turns out closing the trades’ plays an important role to maximize the profit potential. You might think you know a lot about this market but try to ride the trend to its very end. You will notice, you will need a lot more new techniques. For instance, you have to know about the significant highs and lows of the market. These are the points where the price can reverse or even change the trend. You have to very cautious while the price is heading to this zone or else a good profitable trade can turn into a big loss. And the exit plan needs to be designed in such a way so that you are not taking the trades with a negative risk to reward ratio. The minimum risk to reward ratio for the trades should be 1:3 or else you don’t have a robust trading edge.

Testing your draft trading plan

After creating the draft plan, it’s time to test the system in real trading accounts. This is the most important part of creating a trading method. Many traders jump to the real market without backtesting their trading methods. Unless you backtest the trading method, you won’t be able to fine-tune the system. Most of the time, this will lead to catastrophic loss and you won’t be able to earn money. For the betterment of your future, you should test by executing 30-40 trades. You might be thinking it will take years but do have the option to trade multiple stocks. And the benefits of trading multiple stocks in the testing phase is enormous.

You will learn how your system reacts to different assets. Eventually, you will be able to pick favorite assets that have the potential to give maximum returns. If necessary, you can use simulation software to fasten the process of trading. Once the backtesting is done, it’s time to trade the real market.

Trading the real market

Taking trades in the real market is a whole new experience. You should be cautious about your emotions as emotional stress can force you to break the rules at trading. And if you break the rules, you are no longer trading with the backtested trading model. So, learn to control the emotions in the real market.

By Russell Fenton

© 2020 Copyright Russell Fenton - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in