Successful Stock Trading Strategies

You can learn the 16 strategies in the video below. If you can’t understand something or looking for any links mentioned, then check out the transcript below the video.

Understand How Stocks Move

1. Industries and sectors move differently – Whether it is an up or down market, there will always be good stocks to buy. There are too many entities, commodities, and industries to summarize everything under one analysis. If one sector or industry is going down, then there will be others that are going up.

2. Half the battle is just understanding terminology and tendencies – Traders like to use 10 different sayings/terms for one word. Many times just understanding the words will help you instantly improve your trading. Our new financial dictionary has many commonly search financial terms. If you have trouble understanding what something means, then check our database.

3. What makes a stock tick – We’ll talk more about this later, but identify what makes a stock move. What stocks should benefit from the price of oil going up or down.. what about gold? The key is to find comparisons.

4. Public news is late news – When people are unsure of things, they like to wait and see what happens. With the stock market, this is basically draining your account of money. With so many blogs, social media networks, and media resources, the market moves more on perception than actual facts. If a company is being taken over, then its price would have most likely rocketed higher on early rumors. If you have a hunch, act fast and don’t wait for it to become public knowledge.

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Wait For Your Setup

5. Whatever your strategy is, don’t chase stocks. There are too many stocks to have to do that – Its important to develop a strategy that will help analyze if stocks are optimized for your individual needs.

6. You never really know somebody’s else’s profit margin, time span, and bank account – Stock recommendations are good, but put them through your own strategy before fully accepting them. You never know how much money somebody is dealing with or what is an acceptable profit margin for them.

Example: John recommended Stock X. Sean sees the recommendation and instantly buys $1,000 worth of shares; however, what he didn’t know was that John bought $20,000 worth of shares. Stock X goes up $0.10, and John sells and takes his profit. The $0.10 doesn’t come out to much profit for Sean, so he his now stuck to hold longer; however, the stock now sinks and Sean is left with a loss, while John moved on to his next stock.

Sean didn’t know the time frame, profit margin, and money John was dealing with. So always analyze the stock yourself before acting on a recommendation, or try to ask recommender what their info is.

7. If you miss a move, continue to track that stock until it sets up again – Many people miss a move on the stock and move on, which is good, but you should still track the stock. You already know what makes that stock move now, so continue to follow that until it sets up again. Stocks consistently go up and down, so become familiar with it.

People ask me all the time why I analyze the same stocks so often, the reason is because I am tracking them. Obviously, the more you become familiar with a stock, the more you tend to learn what makes it move. Create a watch list.

Share Allocation

8. Invest or don’t invest – If you’re going to invest money into a stock, then invest a good amount. Those that try to play it safe, by just picking up a couple shares, will ultimately be hurt more because the low share volume will result in holding longer than you want to and enhancing odds of losing money.

9. A minimum of 200 shares. Need to factor in price of commissions – 100 shares is alright if you have to. Take into account the money you have. You CAN invest with $500, but stick to stocks with prices under $5. This not only increases chance of making more money, but also narrows potential stocks because you don’t have to worry about anything above $5.

The number of shares determines how much money you make … not how much money you invest.

Let Stocks Play Out

10. Don’t be afraid of red. Stocks go up and down – Unless you sell, you have not actually made any gains or losses. Very rarely will you buy a stock at its bottom. Leave some breathing room for your stocks to work its way higher. If you use stops, then stay consistent for every trade.

11. Take profit when you can. Scale down if you need to – While picking a bad stock is always a bad thing, losing profit is even worse. Remember that no gains are realized until you actually sell. That being said, you should always try to capture profit. Scale down if you need to. By that I mean, if you have 200 shares, then sell 100 and scale out. Don’t let my experience with Starbucks (SBUX) happen to you.

12. Don’t watch stocks everyday if you don’t have to – Keep time frame in mind. Watching your stocks everyday can play mind games on you. If your time frame is 3 months, then who cares what happens tomorrow.

13. Don’t be afraid to lose money – You will lose money, but you will also make money. If you sell every time at first sign of red, then you probably won’t make many successful trades at all.

How Do You Know When To Sell

14. Bad news – If your company is about to go bankrupt, being sued, or some other news not good for business, then good idea to sell.

15. Large volume on down swing – If you’re using technical analysis and that particular down movement is accompanied with large volume, then it could be time to sell.

16. Not following your trading plan – If you bought the stock in hopes of it rising based on some event or action and its not doing that, then it could be time to sell.

Example: You bought a stock on hopes it would rise with gold, but gold rises and the stock doesn’t.

Index/Pattern Reconigtion

17. If oil goes up, what stocks move – Find indexes and commodities, and then see how one relates to the other.

18. Use indexes and markets to determine where to trade – If gold is the hotspot, then find gold related stocks. If the dollar is falling, then find stocks that benefit from this. Use hotspots to help you determine where to find stocks to invest in.

19. Sometimes it is as simple as common sense (NFLX) – Sometimes stock trading doesn’t require anything more than thinking things out. With my Netflix example, I assumed the economy was getting worse. With free services like Hulu and Fancast, consumers could get a Netflix subscription and save money from dropping their cable bills. The stock then went from $28 to $50. See my article on Netflix from a year ago.

Further Learning

Learn step-by-step technical analysis skill – I teach you everything I know about technical analysis and really everything I know about stock trading. I even show exactly how I find stocks to buy. Learn more about over at TWI Chart School.

Talk To Me

I’d like to thank your for taking the time to watch this video. Hopefully you found it insightful and learned something. In fact, I would really like to hear what you thought about it: Did you learning anything, should I do more of these type of things, or whatever. Just email me, use the TWI contact form, or tweet me.