What Are The 9 Profitable Trading Strategies?
The secret to winning in the market is actually not to be right all the time, but to lose the least amount of money possible when you are wrong. If you can win larger than you lose, you will turn out to be a profitable trader. Pride, ego, and stubbornness prevents a trader from reaching the levels that very few can master.
To be a profitable trader, you must:
#1 Manage Risk
Learn to trade a manageable portion of you portfolio (risk less than 2% of your overall portfolio equity on each trade). Always establish a risk/reward ratio before making a trade. Without the ratio, how do you know your risk?
#2 Understand Position Sizing
All traders must learn to know their position on each trade. Do not overtrade or you will run the risk of ruin. Position sizing is rule number one of managing risk.
#3 Cut Losses
Do not allow your losses to run wild. You must learn to cut losses and understand that losses are a part of the game, in fact, a large part of the game. Check your ego of winning at the door. We are here to make money, not go undefeated.
#4 Learn When To Sell
Establish selling rules/criteria. Selling is in actual fact more important than buying as it ties directly to risk management. Use stops if you haven’t yet developed the discipline to get out at your predetermined stop or profit goal.
#5 Average Up In Price
Never hesitate to add shares in a stock that is moving higher but never average down. Remember, cut losses and never throw good money after bad because that is a quick way to the poorhouse.
#6 Develop Patience
It takes years to master trading as an advanced skill; even then, you are never done learning or adapting.
#7 Ignore the News
Do not listen to the stories, gossip and rumors flying around on network television, stock forums or the major financial newspapers. It a surefire route to bad information and clueless advice. Do your own research; you’ll come out much further ahead.
#8 Understand Technical Analysis
Fundamental analysis is a solid part of a trading system but technical analysis brings in the money. You must learn, understand and use technical analysis on a daily basis. Fundamental analysis tells me what and technical analysis tells me when, where and how.
#9 Control your Emotions
You must control your emotions or the game is over! Understand yourself fully.