There’s really no “best way” to trade the market. You can learn how to apply best practice when trading, but there isn’t one surefire way to make money trading. If you want to make money trading the market you’re going to have to find out what you like and what you’re good at.
There’s just so many ways to trade the market. You can be a day trader, you can make trades that last a day or two, or you can make trades that last weeks or months (sometimes called swing traders).
You can also trade all sorts of ways. You can trade when the market is going up, when it’s going down or when it’s flat. You can use charts to trade or you can use financial numbers to trade. Some people like to trade the blue chip stocks while others like to work with small caps. There’s even a few that like to work the penny stocks.
You can short a trade or you can play it long. You can even trade options which will leverage your ability to control more shares for less money while also bringing in another factor into the equation, the time value of expiring options.
I could go on and on about so many different strategies and ways you can trade, but it all doesn’t really mean anything to you in regards to the “best way” to trade because the best way for you will likely be different than what someone else thinks is the best way. What you do need to do though is you need to find your own groove in trading.
How do you find your groove in trading?
Finding your groove isn’t easy. You’re going to have to do a lot of studying and research to figure out what you’re comfortable with. Some people need something a little less risky to work with so they might focus on momentum trading. Others might want something with a higher reward opportunity and go for the penny stocks route.
In the end, it’s up to you to decide. Maybe you like watching the charts and deciding to get in and out based on chart patterns. Maybe you like looking at the candlestick patterns and work off of those. Maybe you’ve found that watching the volume trades works for you. Whatever it is you need to find someone that does it better than you and learn from them. That’s really one of the easiest ways to learn.
I spent years learning from all sorts of things. Some of the things I learned from trial and error, but they cost me. The best trades I made were usually the ones that I had researched well and found others thinking about similar things. I scour the forums, message boards, and apps for ideas. When one of them match what I may be thinking I look more closely to figure out if there’s something there that I can take advantage of.
Over time you’ll discover what works best for you. You’ll figure out what you like to do the most and you’ll get better at doing those things. You’ll begin to notice different patterns and different ways that things happen. Then you can make your own bets with confidence that your trade will go well.
When trades go bad
Trades don’t always go as planned. That’s why it’s important for you to have a plan that you can follow. Whatever your plan may be follow it. If you trust that it will work then stick to it for a while before changing your plan. It might take some while for everything to work out as planned.
It’s smart to have some sort of budgeting in your plan. It might be some sort of stop loss for each trade. Some type of percentage you’re ok with losing on each trade before you close it out. You should also have an idea where you should take profits too. A good trade will always have a plan of when you get in and when to get out of the trade. Whether its profitable or not you should always have your plan in place before you get into the trade.
I remember one of my first penny stock trades that I made. I had a plan to hold a certain number of shares after selling enough for a profit, and holding those shares until a certain thing happened in the trading. I didn’t listen to myself and instead I took some profits early.
Profits are profits, but in hindsight I should not have sold so early. If I would have listened to my original plan I could have been $30,000 richer by the end of that trade. That trade still haunts me to this day because I didn’t follow my original plan and my guts. Instead I got scared and took more profits.
In the end it’s up to you to decide what type of stock market trader you want to be. Just remember that trading is not investing. You can trade all you want, but remember that you should be investing too. Don’t be foolish and only trade. You should always have a solid stock portfolio to go alongside your trading account.