There’s something pretty much every successful trader has in common: a strategy. This applies in particular to active day-traders. Most trading experts who have had some level of success will tell you that having your own strategy is essential. It may not always be fool-proof, but once you refine it, it’s what’s going to guide you through your daily decisions.
If you’re a beginner who wants to create your own strategy, consider the following tips:
Know Your Time Frame
Your time frame is what’s going to be the primary foundational building block of your eventual strategy. Are you going to a day trader for example or a long-term investor? Your goals guide your time frame. If you’re investing to begin saving for retirement, your strategy is going to be different than what it would be if you’re looking to make a profit relatively quickly.
How much money do you have to invest?
If you’re just beginning, you may not have a lot of extra money lying around to invest in the stock market, or anywhere for that matter. It doesn’t mean you can’t invest and do it successfully. It just means that you’ll likely base your strategy on your budget. If you don’t have much to invest, a good place to start might be researching someone like Timothy Sykes and his signature trading challenge. The focus is on penny stocks and shorter-term strategies.
You can’t know how to create your own trading strategy if you don’t understand the fundamentals of trading, as well as what the existing strategies are. You may find that you take elements from several different trading strategies to create something that works for you. To get a good grip on the basics and even the more advanced concepts and approaches to trading that are out there, check out a resource like Warrior Trading, which is an educational website with videos, informative content, and forums and chat rooms where you can discuss topics.
Keep a Journal
This is an important one: keep a trade journal, particularly as you’re just getting started. A trade journal should highlight what you do, the size positions you took, and what types of profits or losses you incurred as a result. When you take the time to make notes of all this information you can start to identify patterns, as well as mistakes and then adjust your future plans. The more you can learn from your past decisions, the better your strategy is going to become.
Define Your Goals (But Keep Them Realistic)
One of the biggest problems most new traders have is that they aren’t realistic with their goals. It’s essential to work on designing a strategy that is based on goals, but not goals that are impossible. The more realistic you can make your goals, the more likely you are to be able to build a sustainable long-term strategy.
Once you can master these tips, with some studying and hands-on experience you can begin to cultivate a strategy that will prove profitable in the world of trading.