There are endless opportunities to make money in trading and stock markets. You have a better chance of becoming a successful trader if you follow these 10 tips. Here you go:
Partially Buys and Partially Sells
Traders tend to think of trading as a single purchase and sale of a single stock. They buy 1000 shares here, and then sell 1000. It places a premium on precision. If you are not precise enough, even a great trade opportunity may turn out to be disappointing. If you build your position slowly and then sell it off, you will have a greater chance of getting a bigger move. While it’s impossible to predict exact lows as well as exact highs, it is possible to average your results and get better overall results.
Predictive and Reaction are the key words
Experts are predicting what will happen next in the market. They may occasionally be correct every once in a while. Most of the time, however, they are often wildly incorrect. How many ‘experts predicted a pandemic? And how did the market react in the following year? None, zero, zip. You make money by reacting to changes in the environment. You can’t predict the future but you can make money by reacting quickly to changing circumstances.
Pressing When It’s Right
Another benefit of the incremental approach is that you can be more aggressive when a trading trade is profitable and less aggressive if it’s not. A lot of traders will miss opportunities to make big profits, even though they may spot a great trade. George Soros stated that it doesn’t matter if you are right, but how much money is lost when you are wrong and how many you make when your are right.
Force Yourself to Take a Decision
Inertia causes the greatest losses for traders. They take a position that isn’t working and then they sit there and do nothing. You can use mental tricks to force yourself into making a decision whenever a stock drops in value. You can decide to either sell it or buy more. Refusing to act is not an option. Are you confident in your trade enough to buy shares? If not, why are you still holding it? You can sell it if your heart is not in it.
Selling Is Your Most Powerful Tools
The best strategic tool you have is the ability sell a position instantly. It is your insurance against major losses. You can repurchase stock that you have sold. Consider it an insurance policy that keeps you in cash for a time, even if you end paying a bit more. Selling is how to manage your risk. It is your best friend.
Diversify by Time Frame
One of the greatest advantages to the incremental approach in trading in tip 1 is that it can also serve as diversification. Although you can diversify and minimize risk by holding multiple stocks, you can also trade in a variety time frames. By using a variety in time frames, incremental trading can help you reduce risk. If you only trade the stocks you like, you don’t have to keep as many stock.
Care More about Positions Than the Indices
Many traders spend way too much time worrying over indices or macro issues than about the stocks they have. 2021 is an excellent example of how indices do not always accurately reflect what is actually happening with most stocks. You don’t need to try and time the market by looking at indices. Instead, you can manage individual stocks to make it happen. Sell them when they’re acting badly to raise cash. This is the best timing.
Maintain Accounts Close to Highs
Warren Buffett said that compounding is key to making it rich. Many people view compounding as the ability to hold one stock for a long period of time while it rises in price. But compounding works well for active traders who keep their accounts as high as possible. This same dynamic benefits someone who has Apple ( AAPL), for many years, as well as a trader who keeps producing returns while their accounts keep hitting new highs.
Tables are Your Best Management Tool
Charts can be very useful, but not in the way most people think. Charts are a framework to help you manage trades. They can be thought of as predictive devices that will tell you where a stock goes. Although they are useful in short-term movements, the predictive abilities of charts erode quickly and they no longer serve as a guide for when you should take profits or lose more. Don’t listen to fortune-telling and focus on trade management.
There are endless ways to make money in the stock market and trading. If you have the capital and patience to make it work, you can find money-making opportunities. You will see the market go through ups, downs, and you need to be able to accept this fact. However, if you persevere and keep trying, you will find trades which work. Finding great trades becomes much more difficult if you’re negative and pessimistic. Although it is great for conserving wealth, it won’t help build it.
Check out Gary Fullett with all of these tips and more.