What traders do not realise is that if supply is near the exact exhaustion and there are still buyers willing to buy, prices will go higher. And vice versa for selling.
Here are 6 trading secrets for day traders or novices stock market traders.
1. Always set your price targets before your entry trade.
If you are going long the market, decide beforehand how much profit you want to take, and also how much you are willing to risk, in case you take a loss. Doing this is quite smart and very good traders never enter a trade unless they know what the potential profit is, as well as the potential loss. Sometimes in a volatile market, you must be prepared to give a little leeway because of the economic conditions or because of a large news item that may be pending.
2. Makes sure your risk reward is 3:1
One of the most significant things about stock trading is you must understand proper risk reward ratios. If you go into the stock market each day with the mentality of lose small, and win big, you will thrive throughout your trading career. So this means even if you have a few losses in a row, and then take a win, your account will never go backwards at the end of the month. Once you gain lots of experience in this area you can move out to ratios as high as 5:1.
3. Be humble and patient.
Successful day traders will never have the feel that they must trade every day. That is not the right approach when you are an active trader. They may sit and watch, but if they do not see any earth shattering opportunities it’s better to sit on their hands. I remember a very smart trader saying to me, sometimes the smartest trade you can make is the one you don’t make. Meaning it’s much harder not to make a trade, than to make a trade for the hell of it and regret it later. If you do not plan your trades, and then trade your plans you can lose entire accounts very fast.
4. Keep disciplined.
Keeping focus is the best way to be a good trader. Once you set out a trader plan, ensure you stick to it, like glue. If you have a mentor, who is very good at stock trader, make live trades and have them watch over your shoulder to ensure you are not making mistakes. This will not only help you keep disciplined, but it will ensure when you are trading on your own you are doing the right things, and taking the right actions at the right time with strict discipline. Also, when you take a profit, never let that profit turn into a loss. It’s always better to exit 50% – 60% of that trade and acknowledge that taking profits and running is also a good trait to have as well. The more wins you can get, and the more profits you can keep the more successful you will be as a trader.
5. Trade with money only you can afford to lose.
Successful traders have a bucket of money they are saving and will have as a longer term goal. But active traders will always invest money they know they can afford to lose. Never gamble with your rent money, or put in positions with your grocery money. Always have money you have saved and feel comfortable to use when the odds are highly in your favour.