It’s easy enough to prepare the best online stock trade. You need only to follow a few simple and repeatable rules. You can prepare every single trade using these rules, and many of them finish with really superior results. You can put these trades into your list of best online stock trades. If you’re a position trade or a day-trader, you can modify these rules for your trading style, as well.
You need to follow only these steps to make many very successful swing stock trades.
- Find a good opportunity
- Prepare a setup with a good risk/reward ratio
- Manage trades with stop-loss techniques
- Take profits based on your trading plan rules
Step 1: Find a good opportunity
Actually, this part can divide into these smaller steps.
- Analyze an actual stock market situation and understand what an actual trend is. Pay attention to the situation when the market is in a mood change or in trend-less mode (trading range).
- Use a stock screening to filter only the candidates that match your trading strategy.
- Manually check charts of every single ticker listed in the stock screener results. Try to find the best and most compelling opportunities.
Using these steps, you can typically finish with only a few possible candidates for any single trading day.
Step 2: Prepare the ideal setup for a swing trade
You should now evaluate every single swing trade opportunity you found by risk management and money management rules you should have described in your trading plan.
You have to check it in accordance with a risk/reward ratio. It’s the most important rule. It should set your possible reward as three times bigger than your possible loss. Or better, if possible (5:1 and so on). An Excel spreadsheet is a very good tool for these calculations.
If you can find these entry and stop-loss levels and possible target areas for a trade opportunity that fits these risk management rules, you can put such a swing trade setup into your daily trading watchlist.
Step 3: Manage your swing trade well
Trade management is as important as the two steps already described above. When you enter the trade, you should immediately apply your rules for stop-loss management. Initial stop-loss levels defined in a trade description and setup should gradually move as trade develops. If your trade moves in your favor, you should also move the stop-loss level accordingly to minimize risk and/or lock your profit.
You can use mental stop techniques or stop-loss orders placed into the broker system.
Step 4: Take profits in your best online stock trade
Do not forget to make the final step that’s accompanied with any good stock trade. Take profits. When your trade approaches the expected target level, do not be greedy and take money off the table. You can close only half or two thirds of your position size but do it. It’s always good to make a payday.
Repeating these steps is necessary to achieve not one best online stock trade but many of them. Your trading journal will show you how your trading improved using these rules, believe me.
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