If you’re just starting out in day trading, it can be a steep learning curve. The trick is to begin with simple strategies, and then build from there.
In this post, we take a look at some of the top trading strategies for stocks so that you can get ahead of the game.
Be as cool as a cucumber
Those who succeed in markets are the ones who stay cool when things get tough. In the words of the ancient Doaist sage, Lao Tzu, “the master is not swayed by profit or loss.”
When things start going wrong (and a trade looks like it’s not going to work out), keep your head. Don’t take any rash actions. Stick to your predefined strategy and don’t deviate. Trust the process. Be at peace in your heart. Know that the universe rewards those who remain patient and unattached.
Cut your losses with stop orders
Losing trades have a nasty habit of continuing to lose. For that reason, hedge your bets by placing stop orders on anything you buy, perhaps 1 or 2 percent below the ask price. This way, you can cut your losses quickly if a trade doesn’t quite turn out how you wanted.
You can also use limit orders as part of your trading strategy. These only fill when a security reaches what you deem to be a fair price – one that will yield you a reasonable return.
Don’t buy penny stocks
Just because penny stocks are cheap, doesn’t mean you should buy them. In fact, there’s usually a reason why company shares are going for cents on the dollar – they’re not worth anything.
Remember, penny stocks are often illiquid. Fewer people are willing to trade them. Hence, they can be challenging to get rid of if you want to unwind your position.
Don’t take big risks immediately
There will be times in your trading career when you’ll feel ready to take big risks, but you should avoid them when you are just starting out. If you want to trade an expensive stock, such as Amazon or Apple, use fractional shares. Try breaking down your trades into small chunks – perhaps as little as $25 at a time – and see what happens. This way, if you do lose money, you still have plenty in your account.
Become more knowledgeable
Lastly, if you think you know something that other market participants do not, leverage that power. Forecasting what is going to happen just a few moments faster than other people can enable you to generate consistently high, long-term returns.