One area that I am constantly asked about is how to create a share trading strategy. So, in this article, I will give you four tips to get you started in creating a solid foundation for your very own share trading strategies and Free Stock Trading Tips. Now, it is true, we are all different and we want different things, which is why one share trading strategy does not fit all. However, it is the foundation that you build your strategy on that needs to be based on the same principles. Get the foundation right and your strategy will stand the test of time. As you move through your journey with me to get educated, you will see exactly why this is so important.
So here are my Four Share Trading Strategies
Share Trading Strategy 1
Successfully trading the share market is not about how much money you make
You may be surprised by this statement, however, successful investing in the share market is not about how much money you make, rather it is about how much you do not lose. In other words, it is about minimising risk, not maximising profits. The most efficient way to minimise risk is to set a stop loss.
A stop loss is a very important part of in all of your share trading strategies and is simply a price point where you want to sell to preserve capital if a recently entered trade turns against you or to protect the profits of a winning trade. Unfortunately, most ‘would be’ traders don’t use stop losses, or are very poor at exiting trades, and as such, are largely unprofitable over time.
Share Trading Strategy 2
‘Timing’ the share market is essential to your trading success
Many investors state that a ‘buy and hold’ strategy is the best way to achieve superior market gains. However, most adopting this approach over the last decade would have seen portfolio values drop by an estimated 50% during the darkest days of the GFC. Making matters worse, in order to return the same value pre-GFC the portfolio has to rise by 100%!
By actively trading you can achieve a far superior return, as shares will generally rise in value for between 12 months to five years before falling away in price for similar periods. Using a ‘buy and hold’ approach will see gains made during bullish periods decimated when the bears take control, which they do on a fairly regular basis.
Adopting a simple capital preservation technique, such as a stop loss, will see your returns compound much faster than simply holding on and hoping for the best.
Share Trading Strategy 3
Only invest in quality blue-chip stocks
There is an old saying that ‘you get what you pay for’, and this mantra extends to the share market. One of the key strategies to successful trading and investing is to buy only quality blue-chip companies with a history of solid returns. However, I see so many traders who mistakenly believe that ‘penny dreadfuls’ hold the key to gaining significant wealth, yet this is rarely, if ever, the case.
Think of it this way. If you were looking to employ someone, would you do so simply on the proviso that their services were cheap? Of course not!! You would want to know that they have a good track record and are capable of completing the tasks for which you have hired them. Buying quality stocks with Free Equity Trading Tips is much the same. It is essential that you buy stocks with solid growth/income prospects that are managed by a well-regarded team. Leave the ‘penny dreadfuls’ to the gamblers, uneducated traders, and investors.
Share Trading Strategy 4
Don’t overuse leverage
There are two emotional vehicles that drive the share market, being fear and greed. Greed dominates the emotional landscape of traders when times are good and fear kicks in when things are bad. In a rising market, you will see many traders leverage up to the hilt, trading just about anything that moves – a rising market will generally hide their mistakes. However, just as leverage can significantly increase returns, losses are also magnified, particularly in a falling market.
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