How to learn to be profitable trader | stockbee

3/08/2018

How to learn to be profitable trader

The single most important thing to long term trading success is your ability to survive the learning curve without losing your capital stake.


If you are a beginner to trading you do not have well developed idea about what works in the market or how to make money in the market. It takes time to find a profitable setup idea and perfect it to work for you.

During learning phase you will try all kinds of time frames from day trading to position trading, you will try all kinds of methods from logical to illogical, you will try all kinds of newsletters to gurus, but the most important thing to remember is you must have your trading capital intact during this entire learning phase.

If you blow up your account or take big draw down , you will be out of this game very quickly.

The process of developing your own setup is costly and involves several trial and error. You will also be constantly bombarded with marketing claiming this the only and best way to make money. Reality is there are several ways to make money in the market. You have to find something that works for you and fits your capital level and time commitment.

Broadly there are some big setup ideas that most profitable traders use to make money , once you understand that then the challenge becomes to develop a process that will exploit that setup ideas.

Momentum is the most common idea traded by most traders. They give it different name but underlying concept behind the setup is always momentum. Momentum is the tendency of stocks to move in direction of pre established momentum.

Momentum is proven market tendency. Stocks with 3 month or six month or one year momentu tend to go up for next three or six or a year. If you know this you can develop several ways to profit from this inherent tendency of stock. It allows you to focus only on stocks with established momentum and avoid stocks not favored by market.

There are several ways to rank stocks by momentum or find when stocks enter momentum phase. Traders buy once momentum is established and fold when momentum starts dying .

Some traders trade same stocks as swing trades. Most momentum stocks during their entire moves have corrections or pullbacks. Traders buy these corrections or shakeouts and then sell when momentum peaks.

If you are a beginner trader or struggling trader first thing you can do is to setup a momentum method . Momentum burst based swing trading is easiest way to get started . ( This site has extensive and free resources on setting this method)

Earnings is another powerful fundamental tendency of stocks that can be used to make money in the market . PEADS or post earnings announcement drift is a well known tendency of stocks. Stocks that have surprisingly good earnings or bad earnings tend to move in direction of that good or bad earnings. Growth investing methods like IBD CANSLIM are based on that. The CANSLIM marries best of both world. earnings plus momentum. ( This site has extensive and free resources on setting this method)

These are two big ideas which if you start using right at beginning of your trading career you will find success quickly.

If you want to reduce your learning curve and mot lose money base your early method on something that works and then over the years refine it.

But remember if you lose your capital you are out of the game.....

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