Last Updated on Apr 7, 2020 by James W
If there was a surefire way to make money with every trade on the stock market we would all be doing it, but not for long as the opportunities would soon dry up in that scenario.
Obviously, it is not possible to make a profit from every trade and there will always be winners and losers but there are definitely strategies that you can use to help improve your chances of making a profit.
Technology now plays a leading role when you are trading stocks and you can learn more at us.tradezero.us, for instance, about trading software and platforms.
Here are some pointers on how to try and trade profitably and build your wealth be creating positive returns.
You need to have a plan
Just like any successful business, you need to have a viable plan that outlines how you intend to make money and once that formula has been tried and tested you need to be disciplined enough to stick to that plan.
A common theme among successful traders is that they have a trading plan that has been honed over a period of time and has been shaped based on what they have learned from their mistakes.
A key point here is that you have a lot of technology at your disposal that allows you to test a trading strategy or see where trades went wrong previously.
All of that data should enable you to create a viable trading plan.
You need to be fully committed to the task
The bottom line is that is you take a half-hearted approach to trading stocks you can probably expect to see similarly modest returns on your investment.
One of the secrets to successful trading is often about committing fully to the task ahead and taking a business-orientated view to the task,m which means keeping detailed trading records, reviewing your strategies on a regular basis, and working out how to maximize profit opportunities.
When you consider what sort of data traders from previous era’s had to work from you begin to appreciate what a significant difference technology has made to the work of a stock trader.
Many professionals tend to use aspects of technology to identify profit opportunities such as charting platforms to drill down deep into what the numbers are telling you and which direction to put your money on.
Another key point is that smartphones and trading apps also make it easier to keep tabs on deals and act quickly when you might be able to secure a profit.
Although it is always being said that past performance should not be interpreted as what will happen in the future it is fair to say that analyzing historical data can potentially highlight revealing trends that might point to what will happen going forward.
It often pays to take advantage of the technology and trading systems that are made available to you in your quest for profitable trades as it easier than ever before to use back-testing to see if your idea would have turned a profit in the past, and may well deliver a positive return in the future if you get your timing right.
Define and understand your risk profile
Everyone has what could be called a comfort zone when it comes to taking risks and trading stocks for profit.
There is always going to be a fine line between trying to protect your trading capital as best as possible and using that cash to build a profitable portfolio and trade your way to meaningful returns.
The cold, hard reality, is that every single trader has to endure losses and it is totally unrealistic to expect that every trade you make will make you money. Your aim should be to define your risk profile and work out what level of exposure you feel comfortable with.
If you take undue risks with your capital it will mot only prove very stressful if you feel that you are more financially exposed than you want to be but it could also mean that it impacts your clarity of thought and prompts you to make rash or uncharacteristic trading decisions.
One way to approach this scenario is consider what level of trading capital you can afford to put to work, based on an assumption that you might not see that money again if your trades don’t work out.
Once you have a sum of money available that you are prepared to lose, even if that is a worst-case scenario, you have your trading capital.
The next step is to develop a strategy where you decide what level of risk you are prepared to accept as a way of protecting that trading capital to a certain extent. Finding that comfort level will allow you to concentrate on finding potential trades that match your risk profile.
Limiting your profits and losses
If there is one rule and trading strategy that you simply can’t ignore it is the use of a stop-loss with each trade.
The vast majority of regular stock traders understand and appreciate the importance of using a system that creates a predetermined level of risk with each trade. It is up to you to decide what that level of risk is but the principle remains the same, which is to know how much money you could make or lose with each trade in order to maintain a level of control over your capital exposure.
One of the key principles of using a stop loss system is that it removes the prospect of emotions affecting your decision-making process. It might be frustrating when you cash out when the target is met and the price continues to go in your favor, but, on the other hand, limiting your losses when you get it wrong is good practice.
Using a stop-loss system helps to ensure that your losses and risk exposure is limited, and if you make enough correct calls with your trades you will still be able to make decent profits.
If you use some of these tactics with your trading system it could make a difference to how successful you are and how well you sleep at night too.