Whatever you start in life, it is important that you learn as much as possible before and at the beginning. Only in this way is it possible to achieve success immediately. And this is especially the case when it comes to things like trading, where every mistake and ignorance will cost you a lot of money. That is not something where you can allow yourself to make mistakes often. So it’s not something to get into until you’ve mastered at least a basic knowledge of how which type of trading works, what strategies are necessary and so on.
If you have bought a lot of books and manuals from which you should learn as much as possible about trading, you may have been disappointed. Although you can find out many useful in those books, most people still have the feeling that they cannot find some of the most important information such as the best ways to make money, how many strategies should a trader have, etc. It’s certainly not the fault of the book’s authors, as trading is a very unpredictable thing and no one can offer you a 100 percent bullet-proof tactic. However, we will do our best to explain to you how many strategies you should have and what they are.
How many strategies should a trader have?
If you are a beginner, you may think that you need to have a lot of strategies right away and that this will bring you success. But that is certainly not true. The reason is very simple. To fully master just one strategy, you need significant knowledge and time.
At all costs you must avoid information overload, which will happen to you if you start learning several strategies at once. And eventually you will have a superficial knowledge of each of them, which may be enough for you to converse with someone about trading, but it will certainly not help you meet your primary goal. And that is to make money.
That is why every experienced trader will tell you to start with only one strategy, because even the most experienced ones have only 2 or 3. For each strategy you have to know when it is time to enter and when to exit the market. That sounds simple, but of course it’s not. To know when those moments are, you have to analyze the market in detail, to know how much risk you can accept and much more.
So our answer to the question of how many strategies should a trader have is to focus on one or a maximum of two because that is the only way to make money. If you try to have 5 for example that will be waste of time and something that will certainly not bring you money. Always keep in mind that even one or two, which are well developed, are enough to make millions.
Necessary elements of any strategy
In order to successfully develop a strategy, you must pay attention to the following elements:
Education – First of all you have to educate yourself on how a certain trading works. Then you have to constantly monitor the state of the market and the global state of the economy. As well as never stopping to further educate yourself by reading different books. There are so many resources for education available to you, it’s just up to you to be diligent. Among your bookmarks, you should also place various sites like www.beststocks.com where you can get an idea of which stocks to invest in at the moment and which to avoid.
Overall, this is such a complex topic, that you always need to learn something new. Not even Warren Buffett and George Soros know everything.
Assets – At the outset you need to determine how much money you have available. It is best to start with the money you can afford to lose, because it is very risky to use capital that you must not lose. Of course, the goal is to make money, but losses will also happen from time to time. One of the basic rules is to never use more than one or two percent of the capital per trade.
Time – If you want this to be your side hustle, you better give up right away. Trading takes a lot of time. You practically have to constantly monitor the market, except when you are sleeping. It’s not something you can do a few hours after your primary job.
Start small – Our advice is to stick to just a few stocks in one day, until you get a better impression of exactly how the stock market works.
Types of trading strategies
There are so many different types. We will introduce you to some of the most used.
End of day
This strategy focuses on the period before the market closes, which is crucial time for you. Everyone who focuses on the “end of day” engages in pre-closing trading by doing so by comparing prices from the previous day. They use different factors to speculate price movements. This is practically the only strategy that allows you to not have to follow the markets all day. For End-of-day, it is enough to follow only the opening and closing of the market.
Day trading is mostly reserved for big fish, because you need significant funds to be able to make money. The complete trade is done only within one day, and generally the price movements are very small during one day. That is why large investments are needed to make a profit. The advantage is that there is no overnight risk, but you also have to dedicate the whole day only to this. Day trading is not for beginners.
As the name suggests, the goal is to “scalp” small profits in a very short time. Those who practice scalping invest in short-term and wait even smallest change. This strategy therefore requires maximum consistency. There is also no overnight risk and it is generally unlikely that you will lose a larger amount of money. That is why it is a popular strategy among those who are not entirely committed to trading. However, it is very complicated to always remain consistent, and if you are not, one moment is enough to lose everything that took you months to earn.
These are just some of the strategies, and swing trading, long/short equity, social trading and many others are also very popular. You need to familiarize yourself with the basics of each and test them, so you can determine which one is right for you. But commit only to one or two.
Demo account is something you must have in order to develop a successful strategy without the risk of losing money. These are accounts that will allow you to trade but using fake money means it is actually a simulation. So you will have the opportunity to get acquainted with everything, without the pressure that brings the fear of losing money.