Developing Your Stock Trading Strategy

There is both a science and an art to successfully trading stocks.
The science part requires doing your due diligence and having a firm grasp on the fundamentals. But the art side is something that will be unique to each individual trader. Part of succeeding as a trader is having the courage to determine what really works best for you personally. Use the following questions to help you determine which strategies fit best with your style:
Do I have enough money available to invest in such a strategy without suffering financial ruin?
Does this strategy require I have a passion for the industries in which I buy stocks?
Is the volume of data required to follow this specific strategy something I can realistically handle?
Do I really have the courage and resilience to handle the ups and downs which may occur with this particular stock trading strategy?
Do I really have the patience and perseverance to see this strategy through to its completion?

Past Performance

The first and most basic trading strategy is often referred to as simple investing. Basically, you look at a company’s past data in combination with how it behaved relative to the changing economy. You use this past history to determine buy and sell trigger points. Then you adjust the strategy as necessary each quarter based on the changed data and behavior of that last quarter.
This is a good strategy for those who require low volatility and are willing to sacrifice a little on the total potential. However, you must be thorough before you execute the strategy or you will waste quite bit of time.

Time

Time is the most distinct way to delineate different stock trading strategies. For people with the financial resources and mental resilience, short trading cycles — even day trading — may be the optimum way to make money with stock trading. However, being completely honest and realistic, sometimes the optimum trading strategy is the opposite extreme from day trading or penny stock trading. You save trading commissions and total time invested by sticking to a quarterly strategy, and you may save your sanity as well.

Patterns

Understanding stock patterns will become a fundamental skill for all serious traders. Mathematical patterns become associated with specific images and patterns. When you learn how to associate these images with their respective mathematical equations, you will be able to spot, diagnose and anticipate stock behavior more quickly and accurately. But take it seriously; this isn’t an exercise in creativity, it is serious pattern recognition.

Swing Trading

A stock trade strategy utilized by knowledgeable traders is called swing trading. Swing trading involves understanding intimidating terms like Bollinger bands, Finonacci numbers and resistance along with support points. Investors use these analytic tools to identify short-term price corrections in a long-term trend.

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