Markus Heitkoetter asked:


Anyone who knows anything about stock trading or day trading has heard the term ‘trading strategy.’ A trading strategy is a simple concept – it’s basically the roadmap that a trader follows while trading the markets. A trading strategy is governed by a set of rules that do not deviate for anything other than market action. Faithfully following a sound trading strategy will provide you with your greatest weapon against your worst enemy – your emotions. With a trading strategy, you’ll know exactly when to buy and when to sell, regardless of what the market does or what your emotions are telling you.

About Day Trading Strategies

Every profitable trader will tell you that the key to trading success is an effective, reliable trading strategy. You, as a trader, need to identify a winning system, implement it, and have the discipline to stick to it. Though it would be possible for you to develop a unique trading strategy, it probably wouldn’t be that practical. The best – and most efficient – approach would be to adopt an existing strategy, one which has been used by other traders in the industry and which has already proven to be successful.

Just remember, whether the strategy you’re using is your own or someone else’s, it is critical that you have a thorough understanding of it, especially its entry and exit signals. Do not fall prey to the pitfalls of following untested trading “advice,” especially the free advice available in numerous trading forums and chat rooms. Advice that you receive in these types of venues is likely to be opinion rather than fact, and in the market, opinions are not worth anything. What you NEED is a proven and effective trading strategy, one that will work in any market, under any market condition.

Because of this need for solid strategies, more and more traders are looking for trading success through technical approaches to the markets. One of these approaches is Welles Wilder’s RSI indicator. The general idea behind using the RSI is to buy when the RSI crosses above 30 and to sell when the RSI crosses below 70. As you can see, these rules are clearly defined and don’t leave much room for interpretation. This is EXACTLY what you want from a trading strategy. In trading, you’ll need to make big decisions in mere seconds. There’s simply no time to rethink, or try to interpret the unknown signals and information that come your way. Following a set of simple, easy-to-understand rules – and having a trading strategy that regulates all of your signals and indicators efficiently – is the major key to trading success.

Though the rules of trading are very important, they are not the most essential element of trading success. The most essential element is YOU. The best trading strategy in the world will be useless if you lose your head in the market and panic. You need to remain calm at all times, executing your trading strategy efficiently, without hesitation.

How to Find a Good Day Trading Strategy

So, you’re convinced that trading strategies are important. Now, how do you find one that works for you? Obviously, day trading strategies don’t grow on trees. You’ll need to do some research and either develop a strategy yourself, or find one that is easy to understand and has been proven to be successful. Take your time and do your research. Your strategy is an important step towards financial success, and it’s more than worth the investment of time and energy. There are plenty of books and helpful websites to guide you along your way.

Also, be on the lookout for scams. There are a lot of “educational companies” out there, each selling their own trading systems and strategies, and each claiming that their system works better than their competitors’. Be wary of these companies. Don’t fall into the trap of believing that you can buy a solid trading strategy for $97 and then make thousands in a short period of time. This is a lie.

More recently, some of the “educational companies” mentioned above started offering “free local workshops” in nice hotels. These free workshops, which are typically advertised in late night infomercials, are another danger sign. Most of them are merely a sales pitch for the company’s actual product, and the learning that takes place at the “workshop” is minimal. You’d be better off spending that time researching the trading market on your own.

To avoid scam artists and faulty systems and strategies, you need to educate yourself. Your trading education should focus on exploring and familiarizing yourself with several different strategies; these ought to teach you to take advantage of price direction. You won’t be able to get a solid education after reading only one book or watching a single 60-minute webinar on the Internet. True education takes more time and effort than that.

Fortunately, there are many ways to get a good trading education these days, and your best source of trading information and research is online.

Education and training play a vital role in the molding of a successful trader. If you want to be profitable in the trading market, you shouldn’t be cheap when it comes to high-quality trading education. Find a company that has a proven track record. Check the Better Business Bureau (BBB) to learn about their reputation. Research the internet for company information, especially handy sites like www.ripoffreport.com and www.badbusinessbureau.com.

Get Researching So You Can Get Trading!

Day trading is a very risky venture if you have limited knowledge, weak discipline, and/or poor money management. However, if you approach day trading correctly, armed with extensive knowledge, a sound strategy, and the drive to succeed, it can become one of the most lucrative business ventures you’ve ever embarked upon!



ARAGORN

John Howard asked:


Learning Forex trading strategy is not a simple task, but in no way it is difficult either. Forex trading is all about regulation, willpower and determination. Leveraging your strength could be extravagant by organizing the apt trading strategy. Forex trading strategies are the key to successful trading or online currency trading. A knowledge of these trading strategies can mean the difference between a profit and a loss and it is therefore imperative that you fully understand the strategies used in trading.

Forex trading is very different from trading in stocks and using strategies will give you more advantages and help you realize even greater profits in the short term. There are a wide range of trading strategies available to investors and one of the most useful of these trading strategies is a strategy known as leverage.

This strategy is designed to allow online currency traders to avail of more funds than are deposited and by using this strategy you can maximize the trading benefits. Using this strategy you can actually utilize as much as 100 times the amount in your deposit account against any trade which will make backing higher yielding transactions even easier and therefore allowing better results in your trading.

The leverage strategy is used on a regular basis and allows investors to take advantage of short term fluctuations in the market.

Another commonly used strategy is known as the stop loss order. This strategy is used to protect investors and it creates a predetermined point at which the investor will not trade. Using this allows investors to minimize losses. This strategy can however, backfire and the investor can run the risk of stopping their trading which could actually go higher and it really is up to the individual trader to choose whether or not to use this forex trading strategy.

An automatic entry order is another of the forex trading strategies that is commonly used and this strategy is used to allow investors to enter into trading when the price is right for them. The price is predetermined and once reached the investor will automatically enter into the trading.

All these forex trading strategies are designed to help investors get the most from their trading and help to minimize their losses. As mentioned earlier knowledge of these strategies is vital if you wish to be successful in trading.

Take the time to actually understand the forex trading strategy. Study the components independently so a deeper understanding of the strategic mechanisms would be mastered. If you recognize the components, internalize its use, and make consistent profits into your trading account, then you have your own Forex trading strategy. It does not really matter what the professionals say, your account balance is the final judge and judges for your strategy.



Robert

Roger Cox asked:

Welcome again to the 10 keys of how to trade stock options successfully. Previously we have discussed the technicalities of options trading. This week I will start looking at the more esoteric aspects of trading beginning with how to formulate a trading plan.

It is imperative you trade with a plan. No trader has ever successfully prospered without a trading plan or with a plan that they didnt stick to. A sound trading plan includes, but is not limited to, the following items:

1. Money management rules, i.e. acceptable profits and losses per trade, how much capital you will commit to any one trade and to the market at any one time.

It is important you identify what your stop loss margin is (as discussed last week) and even more important you stick to it. Writing this sort of information into your trading plan will help cement it in your mind. More on money management will be covered in week eight.

2. Stock and option identification rules, i.e. how you will decide which stocks to trade options on and which options you will trade.

You should figure out if you like technical analysis, fundamental anlysis or a combination of both. How big will your watch list be? What price range of stocks will you trade? Do you like trading in the money or out of the money options? What Greeks will you consider?

3. Entry and exit rules, i.e. What will make you enter and exit a trade, what length of time will you stay in the trade and how often will you trade.

Entry and exit rules will depend largely on technical analysis, write down the patterns and indicators you will look for. Deciding how often to trade will be a big factor in your success. Most people over trade, if you have a fixed profit target then once you have met it you should stop trading. Attempting to go for that little bit extra can lead to a big loss, all the more difficult to take if you had already met your profit target!

4. Your own strategy rules, i.e. which trading strategies you will use primarily and which strategies suit your risk profile.

Know thyself as the ancient Greek saying goes is critical when formulating a stock options trading plan. You will tend to trade options and you do anything else in life, for example, if you are cautious by nature you will trade cautiously, if you are impatient in everyday life you will trade impatiently. Therefore consider your unique traits and formulate your plan around them.

Once you have practiced trading options you will discover your own style of trading, and from that you will develop a plan that suits you. Once you have your plan, and you know it works, stick to it through thick and thin. That doesnt mean that a plan cant be changed but you must ensure that you give your plan a chance to work and that you dont change it the first time you take a loss.

Once you formulate and implement a good trading plan you will be well on your to trading stock options successfully. Next week we will discuss trading with the overall market and index options.

US Government required disclaimer: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of the Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1-800-678-4667).

Kyle

Timothy Stevens asked:


The Foreign Exchange market, it is the most profitable, the premier, the largest and the leading financial market in the world. Millions of people trade in this market through the internet every day, generating as much as two trillion dollars of trade daily on average. But the sad truth is that not everyone is able to take advantage of the opportunities presented by the Foreign Exchange market. More than 95% of all traders lose their money, 4% are able to generate profits and only 1% of all traders are able to make a killing. With those kinds of odds, how can you win?

There are always more than one way to crack an egg, and same thing with the Foreign Exchange market, there are more ways to make a profit in here. An alternative method is by using forex options. There are two types of forex options in this market, the first is the traditional.

Traditional option basically gives you control over certain amount of currency. By paying the contract price, you reserve the right to purchase them but not the obligation to do so. Thus, you risk less money but you receive control over it.

The second type of forex options is the SPOT or Single Payment Options Trading. Here, you will input a scenario you predict. After which you will receive a premium quote; if the scenario takes place, then you will automatically payment.

The advantage of forex options is that it involves less risk. You do not need to put in a lot of money to get good opportunities.



Nathan