10 Tips for Successful Trading
Change your mindset.
Trade together with momentum. Look at the charts. Don’t trade according to what you believe should be the correct position economically.
We have heard “buy low and sell high” numerous times before. But often a more correct approach would be to buy high and sell higher, as the price goes from strength to strength. Just keep a tight stop.
Which way today?
In a bull market one should be long. In a bear market ones should be short. Choose the strongest and weakest shares for each market. Don’t be caught on the wrong side. Trade with the momentum.
What and when.
When the markets are going up you should be long the strongest shares in the market. When markets are grind down you should sell/short the weakest one. Simple, yet often ignored.
Embrace both sides.
Technicals and fundamentals. Understand the underlying drivers of the market, and trade according to the technical signals. When the confirm each other you have a trade.
Keep it simple.
Don’t overcomplicate things. You should be able to easily explain your whole trading system to someone on a piece of paper. Stick to the basics and be disciplined. Remember you reward-to-risk ratio.
The public at large.
When your everyone is jumping on the bandwagon then you should be cautious. But when everyone else is in despair then you should start looking for good opportunities.
Patience is a virtue.
Why take quick profits but hang on to losing trades? Keep a tight stop and let the profit run. The only time this doesn’t apply is in an uncertain bear market – where the tight stop should still be in place, but you may take profits quicker.
The bull comes up the stairs but the bear jumps out the window. Embrace quick market corrections to the down side. The are more volatile and quicker than the up ticks.
Stick to the winners.
Add to your winning trades and cut your losing trades. Be patient with your profitable trades, let the profits run, but eliminate the losers quickly.
Markets can remain irrational for longer than you can stay solvent. Don’t get caught as on of the irrational players.