The more detailed you are about how you enter the market, the greater your defense is against speculation. Being right or wrong isn’t really how you win or lose money. Professionals profit through strategies that take advantage of the market as it moves. None of us can tell the future, so everything you can do to scalp prices for small yet strong gains is a realistic approach. A good way of reducing your risk is by managing the complete number of trades you take.
Here’s an overview of the strategies involved:
Caution—Over and Under Trading
Your main goal is to avoid entering a live market when your risk is at its highest. Your entry should only be done when your price levels are met and when the market behaves the way you anticipated. Overtrading happens when you rush into the market without analyzing the strategy. Overtrading isn’t the act of trading too much; it’s doing so when you lack an opportunity to profit.
Find the Basic Answers in Your Trading Style
Effective strategies work with a set number of trades taken in each active period. These strategies don’t directly set out to have a specific number of trades to take. What happens, instead, is that the historical results of a strategy will average out a performance record, which reveals the number of trades that were taken. The amount of trades you end up making when you’re successful is the key data to record.
As Often as the Market Allows
Another factor behind the number of trades you take is the market’s conditions. Only “buy-and-hold strategies” can endure the shifts of a market as its prices change. Strategies that get in and out of a position fast need to rely on stable market conditions. Day or swing trading, under a few days, is most successful when the conditions are all favorable.
This is a common hurdle, for market shifts can seem profitable when they’re not. Only trade when your highest probability exists.
A Consistent Number for Each Monthly Period
Set your final number of trades for every monthly period. Banks and Wall Street institutions hold to fiscal plans that relate to monthly market shifts. Keeping your trade amount in a successful range keeps you from chasing false ideas.