Stock Trading Strategies
Nov 19th, 2009
Begin: The ideas presented below cannot be considered investment advice. In fact, stock trading strategies cannot be interpreted as investment strategies. Trading is not investing. You visited us to find the keys to stock trading strategies that will make you rich – and soon. Those keys are lost; but we have some ideas that come from that school everyone attends..
Plan: Our sister article discusses a few of the dizzying array of technical analysis factors that can form the basis of your stock trading strategies. But we are not ready for that yet.. Here are our ideas on a discipline that may help us develop stock trading strategies.
1. Know your purpose. Your stock trading strategies must have a goal. One goal stated as: “..make as much money as possible as quickly as possible..” needs some work. Your stock trading strategies will be executed – eventually – with real money. Real, solid money lent to the US. Government for two years returns ??%. Be exact about your stock trading strategies and be realistic.
2. Know your limitations. To paraphrase Clint Eastwood “A trader’s got to know his limitations.” If you are developing your stock trading strategies from this article; you probably don’t have $100,000 to gamble on stock trading strategies. Your online broker will impose limits on the types of trades you may execute. For moderate accounts you will not be able to sell stocks short or sell spreads. Your stock trading strategies will be limited to writing covered calls, buying calls and puts and perhaps buying spreads. Your risk tolerance will limit your choices of stock trading strategies. If you cannot cut your losses; your stock trading strategies carry increased risk.
3. Know your risk. Searching the W we found a couple of books that promise to reveal stock trading strategies that will turn a few thousand dollars into 10’s of thousands of USD. Would those books be a waste of money? Maybe. If you implement stock trading strategies based on the promise of millions of dollars; do not use real money. If your stock trading strategies are tested with virtual money you know your risk – the price of the book.
We expand our thoughts on using virtual money in idea 5 below. Real stock trading strategies executed with real money carry not only monetary risk but emotional risk that may turn into real money losses. Most of the pundits that we follow stress the importance of limiting losses in all stock trading strategies. Your stock trading strategies are, by definition, buy and sell. You must have and exit. You may sell at a loss or you may set a trailing stop to set an exit after the trade objective has been realized. But you must limit your losses
4. Study the tools. Your online broker will supply an extensive selection of technical analysis tools to build your stock trading strategies. These tools come with the warning that the broker does not endorse any specific stock trading strategies or technical analysis tool. There. You have been officially cut loose to develop stock trading strategies that maybe only you believe in. But that’s the fun of it. We are all looking for that lost key – if it really was available for $59.99 the excitement of codifying your very own stock trading strategies would be gone. Study and practice.
5. Know your history. This idea falls in the do-as-I-say-not-as-I-do category. We believe well-defined stock trading strategies will be refined by keeping a careful record of trades. Why did I buy that stock? Why did I sell that stock? Theoretically speaking a journal record of your stock trading strategies should help you emotional noise in your stock trading strategies. In addition to a record of gains and losses; you will come face-to-face with the very real brokerage commission costs of implementing your stock trading strategies. These costs are so important that they dominate our final thoughts.
End: Finally, you must test your stock trading strategies. You may use virtual money in a practice account or a carefully determined amount of real money in a real brokerage account. Again to paraphrase Bonnie Koloc, or Trisha Yearwood or somebody “A trader should never gamble no more than he can stand to loose.” Our idea is that to practice your stock trading strategies you need some real money. A little practice with virtual money is OK to learn the technical analysis tools but to experience the emotional factors and to really see the impact of trading commissions on your stock trading strategies, nothing compares to real money losses.
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