A Trading Strategy should be considered as an important aspect of the Trading plan for a successful trader. In this article, tradingcritique.com explains about 8 essential Trading Strategies that should be followed by Traders as Beginner. These are the basic Trading Strategies and should be followed by all traders from Beginner to Advanced Traders. These strategies will help you to become a successful trader.
What is a Trading Strategy?
A Trading Strategy means a set of rules and processes customized by a trader to successfully execute the trades in Financial trading. It gives a clear path through which you can execute your trade effectively and efficiently.
The Trading Strategy is a part of the Trading plan. Without having a Trading Strategy, the Trading plan is not a complete one.
There are different Financial markets and Financial instruments available for Trading, but the below given 8 Trading Strategies are common for any kind of Trading you want to indulge in. These Trading Strategies are the basic skills you need to practice if you want to become a successful trader. All these skills are not developed in a single day and it needs practice consistently.
The 8 Important Trading Strategies are as follows,
1. Practice your trade
As a Beginner, before you decide to open a Live account with your trading platform, it is essential to practice trading with Demo accounts and free Stock market Simulators available like the one which Investopedia provides. Most of the trading platforms now provide Demo accounts with free virtual cash which you can use to practice trade such as Thinkorswim of TD Ameritrade, xm.com, and ig.com. These Demo accounts with free virtual cash will make you feel that you are trading live.
Even when you trade using Demo accounts you must have a Trading Plan and Trading Strategy. Practising and experiencing in each trade with both success and failures over time will make you an expert in trading.
“Just work like hell, I mean you just have to put in, you know, 80 hours, 80-100 hours every week. If other people are putting in 40 hours per week and you are putting in 100 hours of work in a week, in 4 months you will achieve what takes them a year to achieve.”
– Elon Musk
This great piece of advice by Elon musk to become a successful entrepreneur will also help you to become a successful trader. Practice is the most important and how much time you spend to practice your trading skills also matters.
2. Make trading your skill
Trading is also a skill, whatever skill it be, it requires ample efforts and time for practice from your side to master that skill.
“Skill comes from consistent and deliberate practice. ”
– Shawn Allen
After you practised in Demo accounts, you will feel a little confident about trading. Now start trading in Live accounts using less amount which you afford to lose even if you are not successful in your trades. When you lose a trade analyse what mistake you made in your trade. Correct it the next time.
Try to double your initial investment before investing in more money which is a good practice. To become a master and expert in trading Practice trading consistently.
It is better if you have an experienced personal mentor when you start your trade. Trading Critique can fulfil this job as your mentor. To have a personal mentor for your trading Fill in these details, we will contact you back.
3. Be Disciplined
Discipline is an important factor to become a successful trader. As you are disciplined in your professions, it is important to be disciplined in Trading also if you want to become an expert in Trading.
The Disciplined persons are the ones who succeed in their profession like Warren Buffet, Elon Musk, Jeff Bezos, Bill Gates, etc.
Being Disciplined is the shortcut to become a successful trader. But this takes more efforts, concentration and time to be spent on trading. Practicing your trade with discipline is an essential thing to become a Successful Trader.
If you are disciplined in following the steps of your trading plan and Strategy you can turn out to be a successful trader earning more fruitful profits from Financial trading.
4. Control your emotions while trading
Human psychology impacts a lot in trading. The psychology involved here are emotions that you develop while you are trading which can influence your thinking and behavior as a trader.
Emotions, while you trade, are the major reason which either increases your profit or loss in your trading. While trading, high emotions such as Happiness, Excitement, Anxiety, Fear of loss, Impatience, Stress, and Sentiments should be avoided.
So, emotions should be balanced when you take your decisions in trading. Give some time when you have extreme feelings. Balance your emotions before you do any decision making in trading.
You should develop a positive and unbiased approach. Believe in the analysis you do and get strong in the technical aspects of trading. All your decisions should be backed by strong analysis.
Being practical and rational than emotional always works in trading. Be prepared to face any unexpected losses when the market moves against your analysis and prediction. Nothing can be predicted 100% sure in trading and sometimes you will lose. A successful trader is the one who balances profits and losses to increase the percentage of profits.
5. Knowing about the Risk-Reward ratio for every trades
Before placing any trade, you need to know how much profit you will make if you win the trade. Just knowing the profit alone is not enough. If you need to make a rational decision, you need to know how much loss you can afford in that trade, if you are unsuccessful.
Make the ratio of the values of the loss in trade to the profit in trade (Loss : Profit), this will give you that risk-reward ratio of a particular trade.
The main aim for calculating the risk-reward ratio is that the losses should be manageable from your side.
“Never risk more than what you can afford to lose in Trading.”
– Benjamin Franklin
Practicing this Strategy of calculating the Risk-Reward ratio is very important as this helps you to increase your profits and decrease your losses from any trade you want to execute. Calculating the Risk-Reward ratio is more of a Technical Strategy and Beginners to Advanced traders must follow this.
6. Choose your entry and exit points before you start your trade
This Trading Strategy is the most important and you should decide the specific points when to open your trade and close your trade before entering into it. These opening and closing points in your specific trade should be decided well before placing your trade order.
You can change your decisions according to the market movements periodically, but you should fix how much money you can afford to lose in each trade and close your trade while reaching that point. If you go beyond this limit thinking that the market will move positively to give you more profits, it may end in incredible losses which you must have not thought of where there are chances to lose all your investment.
Taking such kinds of risks in trading is not a rational decision and is done due to Emotional urges. Emotions should be completely avoided in trading and the decision-making in Trading should be purely done on a Rational basis.
Clear decisions on entry and exit are more important in Day trading and Scalping as the trading time is less and more skills are needed. In Position trading/Investing and Swing trading, you have some time to make decisions on closing your trade once you open your position.
7. You should provide a Stop-loss order for your trade
A Stop-loss order is a type of order where you specify the closing position while entering your trade to limit your losses. When the market moves to the stop-loss position specified by you, it will automatically close your trade. You must place this stop-loss order without fail.
If you place a Stop-loss order, it is not required for you to look at the market price movements frequently. This will reduce any fear of loss in your trade, as the order closes as mentioned in the stop-loss order.
The Stop-loss order is important for your trade to decrease any kind of losses which you cannot afford. Without providing a stop-loss, there are chances to lose all of your investment if the market turns so badly against you.
8. Record all your data
All your data about trading should be recorded. The place where you record these data is called a Trading Diary. The opening and closing positions, profit or loss, emotions during the trade, and other things that you feel as important about your trades should be recorded with date and time in your Trading Diary.
All these data recorded should be analyzed and from this analysis, you should develop your own Trading Strategy which is customized for you. Once you perfectly know your customized Strategy you can increase your profits manyfold.
Once you find answers to the above questions your Trading research and Trading plan will be complete. It is important that you follow all the aspects mentioned above when you enter a new trade. Do your Trading research well advanced when you decide to trade in a new Financial market.
How to Develop a Trading Strategy customized for you?
The above 8 Trading Strategies provided are the ones given by our Trading Critique Experts which should be followed by a trader as Beginner. When you are a Beginner in Trading you may not know the process involved in Trading, then these 8 Strategies will help you to develop your basic Trading skills.
Once you get experienced in trading, you can develop the Trading Strategies that are customized for you. Once you start to practice Trade you will learn by yourself to develop your Trading Strategies. To create your Trading Strategies, a Trading Diary will help you a lot.
Importance of having a Trading Strategy
The Trading Strategy is the most basic requirement that should be considered if one takes Trading as a serious business. Without a proper plan, nothing can be properly finished. E.g., Construction of roads, buildings need a properly made plan before, like that trading also needs a proper plan. In the Trade plan, Trading Strategy is an important part without which the Trade plan is not complete. So, every Trader should focus on having a Trading Strategy.
A new concept where you can copy the Trading Strategy of other traders and use those strategies to execute your trade is called Social Trading. This is provided by a famous Broker-Platform called the etoro.
A Trader with a proper Trading Strategy will increase his profits more than the one without a Trading Strategy. A trader without a Trading Strategy will incur more losses than profits. A trader with a Trading Strategy is the one who will be able to see the fruitful side of Trading, whereas, a trader without a trading Strategy will see only the dark side of trading and can never be successful.
In a Nutshell
If you find any difficulty in following and creating your Trading Strategy you can Comment below. You can personally connect with our Trading Critique Experts by asking your queries here. To get regular updates from tradingcritique.com, please do Subscribe to our Newsletter.
Reference
- Book name: The Big Book of Stock Trading Strategies Author: Matthew R. Kratter Publication: Trader University.
- Book name: The Simple Strategy – A Powerful Day Trading Strategy For Trading Futures, Stocks, ETFs and Forex Author: Markus Heitkoetter Publication: Rockwell Trading Services LLC.
