5 tips to become a better stock trader
Are you looking to become a better stock trader? Whether you are swing trading or day trading, learning how to trade stocks is not really difficult at first glance. Develop a system, follow your rules, and make changes to improve it along the way. The only problem? Emotions. They get the best of us over and over again. There’s a reason algorithms don’t struggle so much.
Whether it’s greed when we’ve put together a nice winning streak or panic when volatility increases. We can make all kinds of stupid decisions with our emotions. It’s what makes what could be a straightforward task of becoming one of the toughest roles on the planet.
If you are already into options, day trading, or swing trading, you know it all. So here are five tips to become a better trader. If you’ve heard of it before, consider it reinforcement.
# 1 Follow your trading rules and be disciplined
From a psychological standpoint, it makes sense that traders have such a hard time taking losses. But in order to survive the game of swing trading, taking losses is an essential part of it. Because here is the simple truth: No one out there is going to beat 1,000. Every system has losers and we must contain those losers to survive.
There’s no point in following the rules of your profitable trades if you don’t follow the rules on your way down. Getting it wrong is an ego problem that traders must overcome.
# 2 Be on Twitter
Rise Twitter (NYSE:TWTR) may seem like a strange tip for traders, but it can help tremendously. Find other people who exchange a style similar to yours. Whether swing trading, day trading, options trading, FAANG trading – Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) – forex, futures, etc. No matter.
Find traders with similar styles who trade similar time frames. It can help you refine your trading system and give you insight into what others with more experience are seeing right now.
The caveat with Twitter? Be careful who you follow. I follow hundreds of people related to finance, stocks and business. But my list of “traders” (who is right here) consists of less than 10 people. Paying attention to too many people is adding noise and that noise can be overwhelming and interfere with your decision making.
It is one thing to follow different traders with different time frames for perspective and insight, but just know your completion time.
# 3 Enjoy the wins, but stay humble
Another seemingly simple piece of advice: humility.
Unfortunately, like the other pitfalls of swing trading, being humble is usually learned the hard way. When traders feel excited and on a “trading high” this can become dangerous ground. Overconfidence comes at a price and the market can be a master manipulator, hitting where it hurts just when it counts.
Here’s a lesson: eat a regular course of humble homemade pie, otherwise let the market serve you its own.
# 4 State of mind, state of mind, state of mind!
Trading is not a physical game, it is a mental game. This gives traders a whole host of emotions and every day they need to be prepared to make wise decisions.
But sometimes in life, you can’t help but be a mess. It could be a divorce, a sick family member, the loss of a loved one, or a number of difficult situations. Trading isn’t everything, especially when it comes to the things that are really important. Traders must recognize these situations and be willing to opt out if and when necessary. Breaks can be refreshing and sometimes necessary for our success.
Beyond that, the state of mind plays a central role. Even if you are swing trading or options trading, traders should be able to get started each cool day. Gains shouldn’t make them too excited, and losses shouldn’t make them too low. There is some emotion involved, yes. We are not Robots. But having a clear mind every day helps exponentially when it comes to making decisions.
For example, a healthy mindset and clear focus prevent traders from becoming overconfident. It also prevents them from taking revenge, that is, when we have a loser or a group of losers and we feel ‘cheated’ by the market, we aggressively ‘avenge the trade’ to ‘recover. our money â. Often times, this leads to more losses or, at the very least, reinforces bad habits. We don’t want that in our Zen trading area. If a trader gets there, it’s time to take a break.
# 5 Valuation is the key for a trader
We have scored our entire life, whether it is the number of points or goals we have scored in sport, the speed at which we have run a kilometer or the mark we have achieved in school. Trading is no different. Ultimately our gain or loss is the end of the year mark, but we can make improvements day by day.
Study the charts after the market closes and prepare before the market opens. Know (to some extent) what different scenarios are likely and how you might react in those cases. Not all plans work, but having one is far superior to wandering around E-Trade or Interactive Brokers at 9:28 am ET and trying.
Log each of your trades. Entry, exit, initial stop-loss, profit / loss, etc. Keep a notes section detailing the trade, why it was entered, what went right / wrong and if there were any lessons involved. Take trading notes on the side of your spreadsheet to emphasize broader themes, rules, and ideas.
Go through your notes daily, weekly, or monthly, whichever helps you the most. But just make sure you go through it. It will help you understand what you are doing right and what you are doing wrong. And so, you can do more of what works and less of what doesn’t.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. At the time of this writing, Bret Kenwell is long AAPL, AMZN and GOOGL.