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Trading The Markets: Winning Strategies Explained.
Developing a winning system when it comes to trading can be a daunting task.
In my opinion the first rule for developing a viable plan for trading is simple: take the opposite side of the trade.
Think of it this way.
When the crowd is overly bullish on a particular asset, who is left to buy?
The converse is also true. When the crowd is over bearish, who is left to sell?
The second rule to know is this: the market always over-reacts one way or the other.
For example: good economic news may vault stocks higher only to give back half the next day.
Taking the opposite side of the trade is tough, as it goes against what most people think is right, and this type of thinking is also why 99% of traders fail.
Did you know you can be wrong more than 50% of the time as a trader and still make money in this market?
Please allow me to briefly outline how this is possible, and it comes down to a few simple steps.
Let's break down a particular trade.
For example: you are looking to buy calls on stock XYZ. Most people will simply take a sum of money and push it all in-WRONG!
You would take HALF of the total sum you are thinking of investing and enter your position.
In this manner if your trade goes against you, by closing the position you lose the minimum.
Now lets take this up a notch.
You enter your "half" position and the stock begins to move in the direction you want, now you can add to that position.
By entering a small initial position you minimize your losses, and by adding to a position which is moving in the direction you want, you maximize your gain!
Utilizing these strategies you can be wrong MOST of the time and STILL make money trading.
Let's look at a few more ways to make your trades successful.
Don't try to compete in the very short run: day trading.
Day trading may sound sexy, and there may very well be times when you enter and close a position in a single trading day, but trying to enter and exit positions on a daily basis is almost invariably a losing endeavor.
Think in terms of weeks.
Anything can happen in these markets with short periods of time, hours to days.
For me I take this approach, weeks.
Again, thinking more in terms of "short term investments." Allowing your trades to develop is key to a winning strategy.
I am an options trader who holds positions in terms of weeks allowing my trades the time needed to overcome the shorter term volatility. As such, I buy options with at least a 3 month out expiration date. In this manner I allow my trades the time they need to play out correctly.
Think you know how money and the economy really works?