Ensuring that you win in the stock market does not require you to be a superstar stock picker or even a really good one, rather it all depends on developing a trading system that ensure your average winning trades are significantly larger than your average losing trades. In a strong trending market, the ratio of average winner to average loser can be even higher. But the great news is that making sure your winning trades are larger than your losing trades is quiet easy. You only require discipline to follow strategies.
How to Win
- Stay with the trend until it’s no longer favorable:
When a trade is steadily going in your favor, it is advised to let those profits climb as long as the stock maintains that trend. After a stock breaks out and enters into a steady trend, that trend is likely to remain intact for months or even years; so the longer the trend has been in place, the more likely it is to continue. That is why it is evident that stocks trading at new highs are often unstoppable.
- Know when to exit:
The key to winning in the stock market is to always place a defined protective stop loss immediately after entering each and every new trade. There will be times when a trade doesn’t go in your favor, but when you know you have already set your predefined stop loss order, you’ve got nothing to worry about. And when this happens you shouldn’t beat yourself up because you’re maintaining the required discipline needed to become a consistently successful trader in the long term. Because failing to quickly cut your loss when a trade starts moving too fast in the wrong direction inevitably results in heartache and soon an empty bank account.
- Know where to put your stop-loss:
Placement is the bond that holds favorable trend and the need to get out quickly when situation reverses. Although there are technical indicators to assist traders in knowing precisely where to set stop losses, there are some methods you need to apply. One method is to set stop loss just below technical support of a popular moving average. On up trending stocks, a stop can also be placed just below the prior “swing low” that often creates an anchor point of a trend line.
- Keep records:
A good trader should be a good record keeper. If you win a trade, you should access how you did it. The same thing goes for when you lose, because trust me you don’t want to make the same mistake twice. Writing down details of your past trades (such as targets, entry and exit, the time, support and resistance level, daily open range, market open and close for the day, and record comments on why you made the trade and lessons learned.) helps you analysis the profit or loss for a particular system and other important factors.
- Set goals and do your homework:
Before entering a trade, set realistic profit targets and risk reward ratios. A lot of traders won’t take a trade unless the potential profit is at least three times greater than the risk. And before the market opens you should know what is going on and index feature are a good way of gauging market mood before the market opens.
There is no way to guarantee a trade will make money. The trader chances are strictly based on skills and system of winning and losing. Traders who win consistently treats trading as a business. You should do the same.