When I explain our present market as being rather unforeseeable, I believe most would concur with me. This indicates that a lot of our trades are going to be less than lucrative, a reality which might quickly cause us to jump from one strategy to another, looking for one that still works consistently.
This is not to say that you do not have to sometimes alter exactly what you’re doing to keep up with an altering market. We can prevent this harmful practice of “method jumping” or at least minimize it by planning ahead a little.
Here are some tips for picking the “ideal” method.
Think about exactly what you’re attempting to accomplish with your trading education.
Discovering how to earn a profit will likely be the very first answer which comes to mind. Attempt a bit harder.
Are you trying to produce a constant stream of capital? Are you trading for a certain financial objective? That is, are you trying to make a certain quantity of cash perhaps within a provided time period? Are you simply guessing … and whatever takes place, occurs? These are all questions which need to be responded to if you are going to be able to weather the trading storms you are bound to encounter.
Take an appearance at the probabilities of the trade’s result. If you are trading stocks to move in a certain instructions– up, down, sideways– what are the probabilities that your stock will move in the direction you’ve selected?
If you think a stock is moving up– checked all the technical indicators, examined the basics and done all else within your power to establish which direction the stock is moving– you’ll likely conclude that the stock will either move up or down and then trade it that method. Your chances of making a revenue on this trade will be around 50 percent.
You must avoid such a trade!
Instead of trading what you can not know for sure, why not discover how to trade what you DO understand is going to occur. In this case, you understand that the stock will either go up or down 100 percent of the time! Trade the stock that way by utilizing a neutral trade such as a strangle or straddle. Best to avoid the more engaged and complex neutral positions like married puts, iron condors, etc. The easier, the much better!
Once you’ve stopped trying to achieve the impossible (predicting the future), and settled into a higher probability trade for these less than particular times in the market, it’s always a great concept to remain focused on where you’re going and how you’re going to get there.
Take a look at the probabilities of the trade’s result. If you are trading stocks to move in a particular instructions– up, down, laterally– what are the probabilities that your stock will move in the direction you’ve selected?
If you believe a stock is moving up– examined all the technical indications, examined the basics and done all else within your power to determine which instructions the stock is moving– you’ll likely conclude that the stock will either move up or down and then trade it that method. Rather than trading exactly what you can not know for sure, why not learn to trade exactly what you DO know is going to occur. Trade the stock that method by utilizing a neutral trade such as a strangle or straddle.
To help you plan your trades, I came across this awesome tool called The Dedicated Trader. Check it out!