5 Proven Trading Strategies for Profitable and Consistent Gains
It’s a tale as old as time, isn’t it? You started trading, took some nice profits in the beginning, and now you are either blowing up your account or your trading has gotten extremely volatile? Either way, you are on a stock market roller coaster and you don’t know how to get off.
There is a reason why 90% of traders fail when it comes to day trading. It is because they think that trading is easy. They watch people online make thousands of dollars in minutes with ease. Truth be told, learning to become a professional day trader is going to take as much hard work and practice as becoming an engineer, a lawyer, or a therapist.
Trading is a skill that takes years to master and minutes to destroy if you aren’t doing it correctly. That can be changed though! It is 100% possible for you to be able to make consistent gains in the market. You just have to be willing to put in the effort and time to learn how to succeed.
Below are our top five strategies for changing your trading style from gambling to professional.
“Anything worth doing is worth doing right”
- Hunter S. Thompson
Give yourself time to obtain a proper trading education
You want to be fully aware of how fatigued a stock is becoming. Buyer pressure forces a stock to go up and green candles increase the stock price.
This is the manifestation of firepower coming into the market.
The only reason stocks go up is because more people want to buy the stock than sell it. The more a stock goes up, the less likely it will continue to rise.
That being said, overall trends are still a very reliable source of information that you can look to for information on how to trade the stock.
The best way to get a proper education is to find one or two mentors that you trust and strive to be like. Devour their free content while you get used to their trading style. Once you get a good idea, enroll yourself in their trading course.
They will help you to cut months off your learning time because you will be able to learn from their mistakes.
The best way to improve your life is to invest in yourself. I promise you all your favorite mentors have a mentor themselves. They know that money invested in themselves is money very well spent.
Keep your emotions out of it
Taking a loss does not mean you are a bad trader. Every trader takes multiple losses each week! Taking a loss and not getting out of the trade is irresponsible though.
This is where you have to sit face to face with your ego and realize that only one of you is going to win. If you let your ego win, you will lose your entire account.
If you are feeling anxiety, excitement, or frustration while trading, you are trading with too much of your account. I know that makes it boring at first, but you need to be able to trade without your emotions getting into it.
If you are feeling this way when trading with $500, it will only get worse with $5,000 or $50,000.
If you are able to pinpoint what you are feeling, why you are feeling that way, and what the best and worst outcomes are, you will then be able to outsmart and normalize your emotions. Once that is done, they become less of a threat to your trades.
The fear of the unknown is what causes us to struggle. Whether it’s fearing the trade will go back up if you sell at a small loss or fearing you’ll miss out on profits if you sell too soon, the what-ifs will destroy your account.
Questions to ask yourself to understand why your emotions play such a factor:
- What am I feeling right now?
- Why does this loss bother me?
- What is the best thing that can happen if I take this loss?
- What is the worst thing that can happen if I take this loss?
Don’t start trading without a plan
Entering into a trade without a game plan is as reckless as texting your ex when you’re drunk. It seems like a good idea at the time, but after it’s over, you are embarrassed and left regretting your decisions.
After finding a stock you feel confident about trading, it’s time to make a plan. The easiest plan is a three-step process:
- Find an entry point
- Determine your stop loss
- Pick your profit-taking points
For a beginner, picking your entry point would be beneficial after a confirmed breakout or bouncing off support.
Your stop loss should be set at an amount you are comfortable with losing if the trade goes south. A good rule of thumb would be to set it just under a lower support range or at half the size of your profit-taking point. For example, if you want to set your profit-taking point at +4% from entry, your stop loss could be set at -2% from your entry point.
When picking your profit-taking point, make sure it is realistic to the price of the stock. It is better to stick to a percentage gain, 1–3% is a good goal to strive for when starting out. If you want something more structured than percentage points, set your profit-taking at the confirmed past resistance points.
If you buy multiple shares or contracts, it helps to take profits along the way and raise your stop loss to the breakeven point or just above it after taking your first set of profits.
Make sure to cut your losses short
This is where you are going to learn how disciplined of a person you really are. Nothing will test your confidence in yourself more than losing money because of your own decisions.
It is hard to watch your money disappear in the market, but once you understand that it is inevitable and will happen almost as much as you win, you can relax and start changing your strategy.
Cut your losses short by sticking to your trading plan. If you take your losses at half the size of your profit-taking points, like mentioned earlier, this will ensure that for every win you take you will have to lose two trades to break even.
Keeping your losses tight will make it easier to have a consistently profitable account.
Stick to a game winning strategy
Developing and sticking to a game-winning strategy does not have to be as overwhelming as it seems.
All you need to do is break it down into three steps:
- Create a master watchlist of stocks you find value in
- Master one trading pattern (breakout, range trading, or reversal)
- Make the trade when you see it
Sometimes the more simple you make something seem, the less overwhelming it is. That is only three items on your to-do list to develop a game-winning strategy! You can do that.
You are going to be your biggest obstacle in learning to trade. The simpler you make your list, the quicker you will start understanding what is going on. Do not overcomplicate it for yourself.
In conclusion…
Learning to day trade is not for the faint of heart. It will test your resilience in ways that very few things can. If you can make it through the losses, the learning, and the roller coaster of emotions it will put you through, then you are in for a lifestyle better than you could have ever dreamed of.
The five strategies you need to implement to be a successful trader are:
- Ensuring you have a plan before making a trade
- Obtaining a proper education on how to day trade
- Learning how to cut your losses short
- Mastering your emotions and excluding them from trading all together
- Developing and sticking to a game-winning strategy
If you can do these five things, it will only be a matter of time before day trading replaces your 9–5! After all, that’s the dream, right? What would you give to make your dreams a reality?
