10 Best trading strategies tips for beginners
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Here are the best trading strategies tips for beginners:
- Look
for scenarios where supply and demand are drastically imbalanced, and use
these as your entry points.
The financial markets are like anything else in
life: if supply is near exhaustion and there are still willing buyers, price is
about to go higher. If there is excess supply and no willing buyers, price will
go down. At Online Trading Academy, students are taught to identify these
turning points on a price chart and you can do the same by studying historical
examples.
- Always
set price targets before you jump in.
If you’re buying a long position, decide in advance
how much profit is acceptable as well as a stop-loss level if the trade turns
against you. Then, stick by your decisions. This limits your potential loss and
keeps you from being overly greedy if price spikes to an untenable level.
Exception: in a strong market it’s acceptable to set a new profit goal and
stop-loss level once your initial target is achieved.
- Insist
on a risk-reward ratio of at least 3:1 when setting your targets.
One of the most important lessons in stock trading
for beginners is to understand a proper risk-reward ratio. As the Online
Trading Academy instructors point out, this allows you to “lose small and win
big” and come out ahead even if you have losses on many of your trades. In
fact, once you gain some experience, risk-reward ratios of as high as 5:1 or
even higher may be attainable.
- Be
patient.
Paradoxical though it may seem, successful day
traders often don't trade every day. They may be in the market, at their
computer, but if they don’t see any opportunities that meet their criteria they
will not execute a trade that day. That’s a lot better than going against your
own best judgment out of an impatient desire to “just do something.” Plan
your trades, then trade your plan.
- Be
disciplined.
Again, you need to set a trading plan and stick to
it. At Online Trading Academy, students execute live stock trades in the market
under the guidance of a senior instructor until right decisions become second
nature. If you’re trading on your own, impulsive behavior can be your worst
enemy. Greed can keep you in a position for too long and fear can cause you to
bail out too soon. Don’t expect to get rich on a single trade.
- Don’t
be afraid to push the “order” button.
Novice day traders often face “paralysis by
analysis” because they get wrapped up in watching the candles and the Level 2
columns on their screen and can’t act quickly when opportunity presents itself.
If you’re disciplined and work your plan, actually placing the order should be
automatic. If you’re wrong, your stops will get you out without major damage.
- Only
day trade with money you can afford to lose.
Successful traders have a “little bucket” of risk
capital and a “big bucket” of money they’re saving for retirement or another
long-term goal. Big bucket money tends to be invested more conservatively and
in longer-duration positions. It’s not absolutely forbidden to use this money
occasionally for a day trade, but the odds should be very high in your favor.
- Never
risk too much capital on one trade.
Set a percentage of your total day trading budget
(which might be anywhere from 2% to 10%, depending on how much money you have)
and don’t allow the size of your position to exceed it. Otherwise, you may miss
out on an even better opportunity in the market.
- Don’t
limit day trading to stocks.
Forex, futures and options are three asset classes
that display volatility and liquidity just like stocks, making them ideal for
day trading. And often one of them will present appealing opportunities on a
day when the stock market is going nowhere.
- Don’t
second-guess yourself, but do learn from experience.
Every day trader has losses, so don’t kick yourself
when the occasional trade doesn’t go your way. Do, however, confirm that you
followed your established day trading rules and didn’t get in or out at the
wrong time.
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