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Trading System Plan

August 24th, 2016 No comments

 

Importance of a Trading Plan

 

No matter what type of financial instrument they are trading, successful traders will always utilize a stock trading system. In other words, they do not make random trades and instead they will always trade according to a carefully thought out trading plan or system.

 

Trading System PlanOn the other hand, unsuccessful traders do not use a stock trading system and will instead behave more like gamblers when they are trading stocks. Specifically, unsuccessful traders will attempt to apply any and all of the trading knowledge that they have gained as well as any news or “hot tips” they hear and end up trading in a completely haphazard or undisciplined manner.

 

Moreover, unsuccessful traders will often make trades based on emotions or what they feel to be “instinct.” And while this type of “stock trading system” can make money in the short term and also be exciting; over the long term, such an undisciplined approach is sure to be a money looser. After all, stock trading can be emotionally draining and any trader behaving like a gambler may well tire themselves out long before they run out of capital to trade or begin to suffer heavy trading losses.

 

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Using a Stock Trading System

July 14th, 2016 No comments

 

Stock Trading System Tips

 

A stock trader who wants to be successful for the long term will first need to come up with a viable stock trading system that is grounded on analysis rather than on emotion. More importantly, a viable stock trading system will help a trader to avoid common trading pitfalls and stop them from making random stock trades in response to current market conditions.

 

Typically, a stock trading system will be based upon technical analysis where a trader examines a stock’s historical prices and assumes that any small fluctuation that has occurred in the recent past will likely continue into the near future. This analysis will include the use of common technical charts such as bar charts, candlestick charts and point and figure charts that will exhibit particular technical indicators such as support and resistance, momentum, strength and volatility. These indicators will then be built into a stock trading system to help a trader decide when to buy or sell stocks.

 

Stock Trading System Mistakes

Stock Trading SystemMoreover, a good stock trading system will provide a road-map that will prevent a trader from making some of the following common stock trading mistakes:

 

  • Avoids over or under-trading. A good stock trading system will prevent both over-trading where a trader enters and exits a trade every few seconds as well as under-trading where a trader holds on to a position all day or even longer for much longer periods of time. Instead, it will help a trader strike a happy medium.

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