Trading Strategy

Professional share traders and investors who trade and invest money for a living use sophisticated methods in their line of work one of which is short selling. You may or may not know that you can actually make money in the sharemarket (stockmarket for our American counterparts) anytime - it doesn't matter if the market is trending up and very bullish, stagnant and going sideways or falling in a bearish market situation.

This is the third part of a three part series about getting from analysis to trade execution. The first step in my trading is to decide whether or not the trade is worthwhile. This step was outlined in part one. The second step of trade analysis was examined in part two. In this part we shall look at trade execution. I will also underline the importance of being 100 per cent confident when you execute your trading plan. These are basically the three steps that I undertake to enter in a trade no matter which market I trade, be it the forex market or the stock market.

In the previous post we had a look at the first step in how traders get from analysis to finally executing and committing your capital to the trade, be it forex, stocks or futures. The first step was to have yourself a test to determine if the trade is worthwhile for you. You may have your own methods (send me some ideas!), but I suggested one of my qualifiers as the momentum of the trend line of the particular equity you are looking at.

Unless you’re gambling away your capital at the markets, I expect you as a share trader to be doing some due diligence before each trade - analysing the stock or currency pair before making your mind up whether to enter the trade at all then if the price is trading up, down or sideways. It's all the same deal, the same process whether you trade the US stockmarket, the Australian sharemarket or the forex markets.

Looking over my past trades [there's a lot of them - over 70 buys and sells in a year... so about 35 total trades in 6 months - I took a 6 month breather - a "trading holiday"] there's a common theme that runs through all of the profitable trades. [I only lost out on a few so I've got many profitable trades to look at] The common theme is this: I get excited by the profits and so I close the trade way too early. This is done without any consultation of the charts or any second thought. Why am I doing this?