How to become a profitable trader Part1
The stock market offers big opportunity for profit for the informed speculator. But not everyone who tries trading is successful and many traders are stuck in low returns or negative returns territory.
How can they become profitable?
The key to profitability in the stock market is to find structural edges in the market. Structural edges are inherent to the nature of the market moves. They exist in the market , you just need tools and techniques to extract profit from those structural edges.
What are some of the structural edges in the market?
Momentum is inherent nature of stock moves. Stocks move in short term momentum bursts of 3 to 5 days and in some rare cases 10 to 20 days. Momentum burst exist in all stock market across the world.
LX is an example of momentum burst trade. In 3 days stock made 17% move.
Like LX and KRNT you can find 1000 plus trades in a year. In order to profit from this structural tendency you need to scan for these and enter them on first day and exit them by 3rd or 5th day based on your profit goal.
Volatility cycles is another structural tendency of stocks. A period of low volatility is followed by a breakout in either direction. By targeting low volatility periods for entries you can get a very low risk entry in to stock.
DXCM is a recent example of that. From a period of 10 day low volatility , it had a breakout and made 10% in 4 days. This kind of setup allows you to enter in anticipation.
You can find 1000 setups like NTES and DXCM in a year. All you need to do is to scan for low volatility phases or narrow range bars to find these setups.
In Part2 we will look at 2 more structural tendencies of market and how to profit from them.
How can they become profitable?
The key to profitability in the stock market is to find structural edges in the market. Structural edges are inherent to the nature of the market moves. They exist in the market , you just need tools and techniques to extract profit from those structural edges.
What are some of the structural edges in the market?
Momentum is inherent nature of stock moves. Stocks move in short term momentum bursts of 3 to 5 days and in some rare cases 10 to 20 days. Momentum burst exist in all stock market across the world.
Like LX and KRNT you can find 1000 plus trades in a year. In order to profit from this structural tendency you need to scan for these and enter them on first day and exit them by 3rd or 5th day based on your profit goal.
Volatility cycles is another structural tendency of stocks. A period of low volatility is followed by a breakout in either direction. By targeting low volatility periods for entries you can get a very low risk entry in to stock.
DXCM is a recent example of that. From a period of 10 day low volatility , it had a breakout and made 10% in 4 days. This kind of setup allows you to enter in anticipation.
You can find 1000 setups like NTES and DXCM in a year. All you need to do is to scan for low volatility phases or narrow range bars to find these setups.
In Part2 we will look at 2 more structural tendencies of market and how to profit from them.
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