Run Your Stock Market Trading Strategy Through This 3 Question Filter for Greater Success

Any stock market trading strategy much be looked at critically and objectively before it is employed in the market. A seemingly perfect trading strategy often fails because the traders does adequately understand the strategy or them self. By asking the following three questions in regards to our trading strategy we are more likely find a strategy that works for us personally, not wasting our time and money on something which stands little chance of bringing in profits.

These questions can actually be employed for any situation, not just trading. These questions focus us, and make sure we are constructing a proper plan for action whether it be in relationships, business or negotiation. It is recommended that you write down your thoughts on each question so you reach a sense of finality, truth and self-awareness.

After you have devised a stock market trading strategy, make sure you run the plan through these three questions. You can also go through these questions before you create a trading strategy, but make sure you do it after as well.

1. What outcome do I want to achieve in (or through) the stock market?

Simple enough, but not so fast. This is actually a more complex question than most people realize. Do not say”Make more money” or “Be able to quit my job to trade stocks.” These are vague and mean nothing-you must get precise in what you want to achieve. The results must also be tangible and measurable-“get rich” is not measurable (how much is rich and how will you get there?).

You must also consider the short-term and long-term and how the two need to work together for the same ultimate goal. For instance, if your goal is simple to make money as quickly as possible you will likely try for home-run trades, usually risking too much on each trade. While you may get lucky and have some short-term success over the long-term you will lose everything you have with such reckless action. In other words, this short-term goal is likely at odds with a long-term goal of sustained capital growth into retirement (which is also vague, get specific!).

Take a phrase like “I want to get rich” and widdle it down to a specific target outcome which is measurable and achievable. Write all your thoughts and considerations down, and then take the final result, and put it next to your trading computer so you will be constantly reminded of the outcome you want to achieve.

Your final question related to outcome is: Does my trading plan get me to the outcome I want in the short-term and the long-term? If it does, proceed to the next question. If the trading strategy falls short, go back and rework the trading strategy so it is in line with your desired outcome.

2. What are the consequences of my trading strategy?

You now have an outcome you want to achieve, and everything looks great on paper. Yet, most of us like to indulge our fantasies especially when it comes to our trading strategies. We assume we are smarter than others, and our sheer brilliance will make us money. Wrong. Therefore, write down everything that could go wrong with your trading strategy. Be brutally honest and specifically critique what could blow your strategy to bits.

After you have your list, go over it and ask yourself once again if the outcome you desire is still achievable given the potential consequences of the strategy? Given the realities of the market (no delusions here) can your plan make money? If your trading strategy meets your desired outcome and you can handle the consequences then proceed to the next question. If you can’t handle the consequences your strategy may dish out, then re-work your plan till it is within your personal risk tolerance given the harsh reality of the market.

In this step also consider other consequences outside of the markets. For instance, will the time required to execute the trading strategy take away from family time or beers with the buddies? Can you deal with those consequences? Can your family and friends deal with it? We don’t live in a bubble; our actions affect others, and their actions affect us. Consider the consequences of what you are doing and the effect it will have on yourself and others. Make sure you can handle such consequences.

3. Is my trading strategy consistent with who I am?

This is by far the most important question, as it is where most people fail to account for their individuality. Your trading strategy may look good on paper; it meets your objectives, you can handle the consequences/losses which may result from it, but if it is inconsistent with who you are it is all for not. If you do not like stress and constantly having to watch the market, no matter how much you want to be a day trader it is not going to work–your plans will fail because it is at odds with who are. Alternatively, someone who can’t sleep while they have an open position in the stock market (or any market) is unlikely to achieve long-term success as a swing trader.

Look at your plan and then take inventory of you who you are. Do you and the trading strategy mesh? If not, re-work the strategy. If you feel you will constantly need to fight internal urges and aspects of yourself, then your strategy will likely fail. Or you may need to set physical barriers to keep you from your tendencies, such as turning off monitors after entries, stops and profit targets have been set. This will help you to avoid exiting positions too early if this is one of your tendencies. It may mean having to leave the house or trading office during lunch if you continually violate your rules during this sedate part of the day.

Know yourself, and then build your trading strategy so it factors you and your tendencies into the equation. If you and your trading strategy do mesh, make sure you are not lying to yourself, and then proceed with executing your plan in the stock market. If the plan has passed through these questions in an honest fashion, you will be well on your way to achieving your stock market and financial objectives.

Summary

If you are struggling in life in or in trading, run your decisions and trading strategies through these three questions. The questions, if fully and honestly answered, will clarify your objectives, make you aware of potential risk and ultimately determine if the strategy you have chosen is right for who you are. Trading is more than just plunking a plan on paper or striking the buy and sell keys, you must make sure your trading strategies align with your life and your personality. Stop losing money in the stock market (any market) and get honest with yourself. Trading strategies that do not align with who you are will result in let-down after let-down. Trading strategies that have passed through the three question filter honestly and completely, are more likely to bring you success.

Forex Market Trading

For all those who are not exactly experts when it comes to forex market trading, the first thing to understand is that it is not the same thing as stock market trading. Forex trading and stock trading are two entirely different concepts.

Different kinds of securities are traded in stock markets and forex markets and under very different market conditions too. The forex market deals in the trade of foreign currencies whereas the stock market deals with trade of stocks and shares. This is probably the most important distinction between the two different kinds of trading.

The term forex defines foreign exchange. It is to be understood that the forex market is a platform where the activity of forex market trading is undertaken. The players involved are investors who try to make profits by speculating on the rise or fall of the value of different currencies from all parts of the world.

There is no limit to the forex depth of market trading and your success in this field is defined by your experience. Most forex investors are experienced enough to know how to extract profits for themselves by maneuvering of the rise or fall of value of currencies in the market in their favor.

All investors, old or new should be aware of the forex depth of market trading. It is the only way to make a success out of your career as a forex trading investor. All forex trading investors should know very well that, like any other market trading, this type of investment also involves two actions, namely, purchasing and selling of currencies.

As a trader you can choose to purchase or sell any currency amongst hundreds of options. But most regular traders stick to some popular currencies such as GBP, EUR, USD, CAD, JPY, AUD and CHF.

The usual strategy adopted by investors involved in forex market trading is to use one currency as the base and then use to compare with other currencies to find out the comparative values. This is a very effective method for newcomers in this line to understand the workings behind the frequent rise and fall of different currency values in a given day.

Thus, if you are looking to learn how to increase your forex trading profits, you will have to increase your investment and try to involve other major currencies as the base in your trading cycle.

Once this is accomplished, the prices of currencies that are not your preferred base currencies can be compared with the price of your base currencies. This is why it is very important to have detailed knowledge about the forex depth of market trading.

But though this sounds easy to follow, it has to be remembered that keeping track of various currencies, their charts and their trading prices can turn out to be quite a difficult task.

That is why several newcomers and even seasoned traders prefer to take the help of certain automated forex software to keep track of their forex market trading business. Such software helps to keep tabs on the frequent fluctuations in the forex pricing.

In fact, a good forex trading software can also make out if a new price trend is emerging and can let the trader know in advance so that he or she can make the trade at the most profitable time. It is always best to get as much information as you can on forex depth of market trading before actually starting out as an investor in this business.

Online Stock Market Trading – 12 Step Guide to Success in the Stock Market For Beginner Traders

Here’s your short, step-by-step guide for trading the stock market for beginners:

1. Investing tools you’ll need: an easy to use calculator, a spreadsheet program, a good computer with ample processing speed and good-sized monitor, a color printer, a high speed internet connection with security protection, access to a stock screener and an open account with an online brokerage.

2. Open an account with an online trading broker. Look at commission fees and other service charges. There are several websites that offer side-by-side comparisons of online stock brokerages. Use the account for access to stock market information, resources and educational programs you can use as you begin the stock trading process.

3. Research various investing strategies and choose one or two. Websites and books are terrific resources for finding stock trading strategies. Search on Amazon for stock trading books and use the reviewer’s comments to choose a book to purchase or check it out at your local library.

4. Write out your trading plan. This will be your stock trading guide detailing when will you get in and out of a stock, how much to trade on any one stock, risk management, when to sell and setting your goals.

5. Find good trading candidates. Have access to a good stock scanner for technicals. Your broker should have the tool you need.

6. Practice buying and selling stocks. Before making any stock trades, a smart and practical thing to do is to “paper trade” as you begin to learn and evaluate strategies. That’s basically where you keep a fake portfolio of your trades until you have confidence in your strategies. Your broker should offer watch portfolio services and you can also find it for free on Yahoo Finance.

7. Know the direction of the stock market trend. Before making any stock trades, learn how to determine the direction of the general markets. You’ll want to buy into an upward moving market to give your trades support. A strongly downward trending market will work against any long trades as in 2008.

8. How much capital to trade. Before you buy any stock decide how much of your capital you’ll trade in any one stock.

9. Incubation. Right after you purchase a stock it goes into an “incubation period.” There’s really nothing you can do but give the stock space to grow. Like when you plant a seed and you’re waiting for it to grow. If it doesn’t grow you have to plant a new seed.

10. Know when to sell or when to buy more. Beginner online stock trading success relies heavily on knowing when to exit a position in order to protect your initial capital and your gains. Examples include a stop loss based on a percentage, a dollar amount or the stock’s price volatility. For buying more of a position, this can be based on a percentage gain combined with price strength.

11. Track and document your trades. Successful online stock trading includes continuous improvement on your strategies and system. After you close out a trade, print out the chart for review. Looking back will give you a good picture of any places for improvement. It also gives you a chance to see if you are meeting your stock trading goals.

12. Make time to continue learning. Stock trading knowledge is power and continuing to build your experience and knowledge will increase your ability to successfully profit in the stock market.

That’s the simplified guide to online stock market trading for beginners.