People who are interested in trading stocks in the stock market are always on the lookout for tips to trading successfully. This is understandable because a stock trader’s main priority in trading stocks is the bottom line. What is the bottom line you may ask? Of course, it is, maximizing profits. When you learn to trade stocks consistently, maximizing profits will become a reality. Following, are a few solid, mainly common sense, stock trading tips:
• Calculate the risk involved in a stock trade before entering
• Define entry and exit points clearly
• Scanning
First, before entering the stock trade, calculate the risk and make certain you are willing to accept that risk. Understand that there will always be some percentage of risk involved when it comes to trading stocks. In fact, calculating risk has nothing to do with the fact that you are either a professional stock trader or you are brand new to stock trading. It is more common sense to first calculate the risk involved before you, as a stock trader, can consciously accept or agree to that risk. Once the stock trade starts going in your direction, the risk can be reduced.
Understanding where to enter and exit a stock trade can obviously boost your profit potential considerably. Most stock traders use technical indicators on stock charts to more accurately determine entry and exit points. There are numerous technical indicators that can be used such as, MACD, stochastic, pivot points, areas of strength and resistance, and the open, high, low, and previous close are just a few to mention. Some stock traders also watch price action, VWAP (volume weighted average price), and trend lines. There are numerous other technical indicators used to determine entry and exit points. It depends on what the stock trader is most confident in using. Once the stock trader discovers the technical indicators that work best for their style of stock trading, learning to be more consistent with them will continue to ensure a higher rate of profit success.
Scanning is a very important factor when it comes to increasing the number of stock trades in order to increase profit potential. There are many good scanners on the market. Some brokerage firms have effective scanners built into their platforms that provide excellent scalping opportunities throughout the day, allowing the stock trader to make better stock picks. Instead of looking through thousands and thousands of stocks, a stock scanner allows a stock trader to set parameters. These parameters are defined by what the stock trader is looking for and produces lists of potential stock picks in a matter of seconds. In other words, a scanner does the filtering for the stock trader. Stock scanners do not predict which stocks are going to be profitable; however, they do increase the stock traders winning percentages greatly by providing technical analysis at a fast pace, allowing the stock trader to determine which stock will provide the most profit potential.
