Stock Trading Strategies

For trader Stock Trading strategies plan to try to make a living from trading, here are the 9 steps to follow to get started in trading.

Table of Contents

Perform a self-assessment

Success in your will to live trading will require a combination of knowledge, skills, and character traits as well as a commitment to a lifestyle.

Are you analytically savvy, financially savvy, aware of the psychology of behavior and do you have the skills for entrepreneurship?

A good state of mind is undoubtedly the most valuable quality for a living from trading. If you’re not willing to put in the time, learn on your own, and mentally prepare yourself to take risks and take losses, making a living from trading might be hard for you.

Have sufficient capital

It is illusory to think that one can generate profits consistently. Losses are part of any trader’s career.

To face these risks, a trader must have a sufficient capital cushion. Starting trading and hoping to make a living from it with a modest capital does not exclude you from succeeding in making a living from trading, but it definitely reduces your chances.

Before resigning from your job to trade full time, you should have some capital. It is possible to start trading with smaller amounts, while waiting to progress and commit more capital if your answer to can we live from trading is yes for you.

Understand how markets work

Traders must have solid knowledge of the functioning of the financial markets. From simple details (such as trading hours and closing days) to complex details (such as the impact of economic statistics, or company news), a trader must have a broad base of knowledge that he can use to make sound trading decisions.

Know the different instruments to trade

There are many instruments, each with their specificities: Shares, ETFs, CFDs, Futures are a few examples. Without a complete understanding of a security’s characteristics and trading requirements, you are unlikely to be successful.

For example, you need to know the margin requirements for the different markets. It is also necessary to understand the concepts of expiry of Futures and swap of CFDs, among others.

Misunderstanding the specific functioning of the instruments can lead to painful losses, without you being wrong in your trading decision. Traders must therefore ensure that they fully understand the functioning of the instruments on which they operate.

Set up a trading strategy

Novice traders should choose at least two trading strategies. These two strategies should ideally complement each other in case of failure or lack of trading opportunities. Subsequently, more strategies can be implemented simultaneously or alternately as experience accumulates.

The world of trading is constantly changing. A strategy may prove successful for a long time, but then suddenly fail in the face of changing market conditions.

The effectiveness of the chosen strategy should be closely monitored and adapted, modified, abandoned or changed as the situation evolves.

Moving from strategy to trading plan

It is not enough to select good trading strategies to succeed in the financial markets. Other factors come into play, complementing the strategy to arrive at the trading plan:

What are the position entry and exit criteria

How much capital will be used

What will be the amount of the positions

What are the assets that will be traded

Trade frequency