Top 10 Best Stock Trading Tips
So you need a bit of guidance and pointers to aid your trading? Don’t worry, here you will find the 10 best stock trading tips that should be engrained in every trader’s mind and will be helpful to beginners and a good reminder to veterans as well. With that being said, let’s get started!
1. Be patient
There is no doubt about it. Being patient in the stock market is vital if you want to become successful at trading, whether you’re a day trader or invest long term. This can be very difficult but you have to remember that there will always be another trade. So don’t chase stocks or you’ll get burned. Also, be careful not to overtrade. It will cost you big. You really have to wait for a good setup on a decent stock and once the move is confirmed, pounce like a tiger!
2. Have a trading plan/strategy
You can’t trade without knowing what you’re even going to do. You need to define your entry and exit price before you enter any kind of position. Moreover, know if you want to trade a particular market or sector and basically make sure you have a criteria list that must be met in order to enter a trade.
3. Cut losses quickly
This can be hard to come to terms with but once you do you’ll be very glad. I can tell you from experience that holding on to losing trades will wreck your trading account. Implementing this rule without exception has probably been one of the best things that happened in my trading career. You can cut your losses quickly without being involved with different types of stop losses. Remember you want to remove your emotions when it comes to things like selling a position in this game.
4. Learn from your mistakes
Making mistakes and having losses is part of trading. However, you have to learn from these mistakes or you will repeat them over and over again. Try journaling your trades to see where you’re going wrong and then make adjustments.
5. Trade what you know
It seems obvious that you shouldn’t trade what you don’t really know yet in practice it’s quite hard. Only trade instruments you have experience with. For example, only trade brand name stocks that you know. It’s also good to know the typical price action of the stock you’re going to be trading. (Pro Tip : Avoid Penny Stocks, if you want to know if penny stocks are right for you, click here.)
6. Let winners ride
Everyone wants to lock in those sweet profits and while it’s a good idea to do so you may be missing out on larger gains. There’s a pretty good chance that if you bought a stock and it went well right from the beginning of the trade that you got a winner. This usually means you caught a move early, where money is still flowing in. Try holding on to your position until your trading idea is invalidated by some factor. This can be based on the technicals of the stock or fundamentals of the company.
7. Always look at the risk/reward of the trade
See how much your risking compared to what you’re expecting to make. You want the ratio to be at least 2. For example, Your willing to risk 1 dollar to make $2. Pay attention to this. You may be entering trades where you are risking a lot of capital to make pennies. You can probably imagine how that ends.
8. Don’t be unrealistic
It’s ok to have big dreams just don’t expect too much from one trade. If you are expecting unreasonable returns you’re setting yourself up for disappointment and failure. Instead, try to be disciplined by sticking to your plan and let the gains come to you naturally. They will add up quickly if you don’t mess it up by being stubborn and breaking your rules.
9. Avoid trading around big events
This is one of the best stock trading tips that may not seem obvious to some. I would avoid trading around news-like events when possible. This means earnings, press releases, meetings… You can’t predict what’s going to happen so don’t try. You should rather react to news-like events instead of trying to predict what’s going to happen.
10. Learn, learn and learn again
There is no secret or magical formula. At the end of the day, you can read the best stock trading tips out there but hard work and experience are what counts. Don’t lose hope, though. Just make sure you read books, learn concepts and strategies (like everything there is to know about technical analysis), get involved with the community… These will define your success in this game.
I Hope You Enjoyed These 10 Best Stock Trading Tips. Best Of Luck In The Markets.