Regardless of whether you day trade, swing trade, momentum trade, or position trade making higher profits from each trade is an important goal. When each trade generates higher returns for your efforts, time, and capital your net earnings increase exponentially.
Trading is a skill, and there are various levels of skilled traders. Professionals enjoy an 80-95% success rate with each trade netting high profitability. Retail traders are those who trade from personal computers, and no matter what style they use have a success rate of 50% or lower. This means that often the profits they make are soon lost. This kind of seesaw profitability from profits to losses keeps them from earning as much as professionals in terms of Rate Of Investment. When retail traders have consistent success, profits grow, ROI improves, and capital bases rise. The more funds you have at your disposal the more opportunities you will find to trade, which automatically lowers your risk.
Here are 5 Tips on how to increase stock trading profits:
1. Skill development depends on studying charts, and learning to read indicators better. The focus should not be on how much money you are going to make, but on how well you trade the stocks you select. When you are thinking about the money aspect rather than the skill aspect, How to Invest Online your mindset is not where it needs to be. Professionals are striving constantly to be the highest skilled traders. They know that expert skills equal higher profits automatically. Professionals continually work to improve their technical skills.
2. Wait 20-30 minutes after market close to make sure all the consolidated ticker data is in the charts. Make sure that when you study stock charts that you are rested, and that you have waited for all the data to come in from the daily trading activity. The stock market is far more complex than it was a decade ago. There are over 50 Dark Pool Alternative Trading System venues, dozens of Electronic Communication Networks, over a dozen stock exchanges, and many other Over-The-Counter platforms. Every order regardless of the venue must go through the National Clearinghouses, be recorded, documented, and transfer of title even if the stock transaction was on the High Frequency Trading millisecond. This means buyers have been verified that they are able to pay for the purchase, and sellers have received that payment which takes time. So if you are checking stock charts just after market close, you do not have all the data in your charts.
3. Pay attention to the Market Condition. If you can’t find excellent stocks to trade for the next trading day, then don’t keep looking. How you want to trade, the trading strategies you are using, and the candlestick patterns you want to use are not prevalent at that time if you cannot easily find stocks. Market Conditions change all the time and strategies, stock indicators, and candlestick patterns reveal those different Market Conditions. Do not try to force the market to your desire to trade. Instead, be adaptable and learn to go with the market. All too often retail traders are fighting the flow of the market, trying to force it fit to their goals. This is a huge reason why retail traders have inconsistent results. Professional traders learn when to wait and when to trade aggressively, thereby avoiding chronic whipsaw trades and frequent losses.
4. Trust the charts and indicators. Trading is very much like flying an airplane in the clouds or piloting a boat through fog. When your stock indicators are weak, the trade will be weak as well. If the candlestick or price action is shrinking as the run moves up, the price action is weakening. Also be aware that you must learn to not only study the short term, day to day or intraday activity, but also the intermediate term trend for technical trading strategies. The most common missed analysis that causes many losses or missed profits, is due to the intermediate term trend impacting the short term trend and day to day price action. When you include the intermediate term trend analysis, more support and resistance patterns can be seen that will affect all trading styles, even brief intraday trading action.
5. Be aware which Market Participant Groups are actively trading the stock. The market is no longer just Wall Street versus Main Street, which is an outdated notion. There are 9 distinct Market Participant Groups. Each uses a different order processing system and venue, unique order types, size of lot order, and trades at specific times of the day or during specific market conditions. Each Market Participant group also has access to vital information at different times than the others. Capital bases and reasons for the buy or sell also are uniquely different for each group. When you know with whom you are trading, you will be able to accurately identify how this group moves price or doesn’t move price, how volume behaves, and what size lots they use as well as whether they are trading lit or unlit venues.
Raise expectations and do not settle for mediocre profits. Trading is a skill that is learned. The best way to start is with an education that is not a strategy but a complete process. Then it takes practice, and fortunately nowadays simulator trading is available. Practicing before going live in the market hones skills, improves analytical abilities, reduces risk and mistakes, and increases profitability. Always start first with simulator trading. Professionals continually use simulators even after their skills are honed to an expert level as they test new strategies, concepts, and trading styles.