Profitable stock trading strategy is an utmost goal of every active trader or investor.
I have developed basics of my stock trading strategy several years ago. But it does not mean that it has not changed since then. The market is constantly changing its behavior so my strategies for swing trades and position trades are evolving constantly.
As I mentioned the market is not always the same. It can have different phases like bull, bear or range bound situation. There are also very volatile markets and days or weeks with low volatility on trading floor during weeks or months.
So I think that there is important to have developed several different strategies that could be used in different markets. There is also necessary to have developed system how to decide what is actual situation and if investors are bullish or bearish today.
I regularly write details of my stock trading strategies in my free newsletter for traders. Subscribe to this free stock trading newsletter and learn more about my personal approach to market online trading.
There is also another term used together with stock market strategy. One or more stock trading strategies are often mentioned as stock trading system. I do not see big difference between these two stock market terms.
Good stock market trading systems should give you answers to these two (and also others) questions:
But don’t worry. It can be really simple. Just use the principles of technical analysis (TA). This "reading of stock charts" will provide to you a machine that will generate answers to these questions every day.
I recommend you go through these steps:
Here you will use basics from the previous step to define how you will find answers to the two questions above, basically, rules for market screening and rules for trade entries, exits, stops and their management.
Also don’t forget to read about the possible results of every trade in your strategy.
It is important to check trend on index charts before decision what direction of trade strategy should be preferred - long or short ?
The analysis of stock market close could be also used in any of your market strategy.
Don’t forget to put into your trading plan these important money management rules defining maximal risk for your trades.
It is also good to have an idea about stock market trends when you apply your money management rules.
Apply all rules defined above and practice them. Use a detailed journal of your trades to generate statistics, Fine-tune your system and strategy based on these statistics to obtain the best results.
If you want to test your market strategy or risk management for your system, then always use some paper trade methods.
Then you can open an account with a good broker and begin to trade stocks using the principles of your stock trading strategy.
All these info combined should define your strategy that consists four steps for profitable stock trading.
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