It is the goal of every stock trader and investor to formulate his own profitable stock trading strategy. Being a serious trader you might have many different trading strategies for different market conditions. You might have also noticed that there is a regular uptrend or downtrend for a certain period of time. Many a time it can move sideways too. One has to implement a proper strategy to make money.
The market constantly changes its behavior pattern and hence your strategy should evolve accordingly.
Your system should define rules set according to market trends, present and the future situation, regarding which the best trading strategy you should use. You can be a day trader and may prefer swing trades or positional trades.
Questions you should answer before preparing a strategy
Basically, your marketing strategy should be able to answer two important questions. First, how to find the best pick for your strategy and secondly how will you trade. Answers to these two questions will be the description of your trading strategy.
On alliance research you will find almost everything you need to trade for your strategies.
Finding stocks to trade
One should use technical and fundamental analysis to find the stock you wish to trade. First, you can use the screener to make automatic pre-selection. Secondly, once you are done with your selection you can fine-tune your selection using individual chart analysis or some other screener. Screen strategy sector wise, industry wise, with both fundamental and technical analysis. Thirdly create a trade setup for the best opportunity you find.
Testing your strategies
Once the strategy is formulated you should test all your strategies before you use it on your trading account. There are various different options available to test your strategy. One can use back-testing tool to back test automatically. You can use paper trades using the MS Excel spread sheet or use paper and pen to note your trades.
Moving on to the next step
Once your strategies start showing positive results you can follow real-time strategy testing with a small amount of money. You can start with 100 – 200 shares to test your strategy in real time. You can see that if your results are nearly similar to your virtual trading.
If trading with small amounts is satisfactory, well you can integrate such strategy into your trading account.
Money is an integral part of your trading hence its management for every single strategy is a must. The rules can be common for your overall trading system or they can be adjusted for each strategy that you make.
For money management, you should know answers to how much is your risk appetite for every position in your portfolio, how many open trades one can have at any given time, and what will be reward and risk ratio. Your money management strategy will help you to arrive on a figure how many shares are to be bought in a single trade. This way you will able to manage your risk as well as your money.
One should trade only in liquid stocks. These were some stock trading strategies that you can employ and use for profitable trades. For further details, you can contact us.