To be a successful trader, you need to zero in on a strategy that works specifically for you. Let’s suppose you have already paper traded and understand the technicalities of the market, how then do you stay consistent with stock trading when you are just starting out? Is there any secret to staying profitable?
Consistency in Stock Trading
The key to consistency in stock trading is really straightforward, but can be difficult to achieve. It requires you to stay true to your path. You need to remove distractions that can cause deviation from your goals and trading rules. Trading is not a get-rich quick game, at least that cannot be your mentality when starting out. Trading is a long-term commitment. To maintain your consistency, you want to control the two following factors
1. Emotions – Stock trading is difficult, and can be even more difficult if you do not control your emotions. The three most prevalent types of emotion during stock trading are fear, greed, and anger. The fear of entering a position, the greed of not exiting a losing or winning position, and the anger of losing money or missing out on a potential profit. Emotions are human nature and it can be extremely difficult to suppress them as they arise. To minimize these incidents, you need to stay objective, and methodical during trading sessions. Always keep your mind on the goals and rules you have set forth so that your emotions are kept in check. If you find it difficult to exit a losing position, always try to maintain a stop loss on your position. A stop loss triggers and automatically liquidates your position once the price has fallen below a certain value.
2. Trading Plan – To stay consistent in investing or trading, you have to craft a trading plan, and more importantly stick with the plan and see it through. A trading plan is something that you can either write on a piece of paper or visualize in your head. It should contain the goals you have set, the strategies that you will use and the historical records of your past trades. Reviewing your past trades and making rules to your strategies will serve as constant reminder for you to stay away from emotionally charged decisions. A bullet proof trading plan while involved in stock trading is a must.
Whether you are day, swing, scalp or position trading, the underlying concepts of trading do not change. You have to aim to be consistent across the board to see reasonable profits over time, and the only way to do that is to stay objective and keep your emotions in check.