Trading Technique

You have a choice on which style of trading you would like to adapt in your own trading in the stock markets. (Or the forex markets if you're adventurous). That is either to trade fundamentally or technically. Some traders like to mix it up a bit and trade a hybrid system that takes into consideration both the company situation and the chart behaviour. I like to do a bit of hybrid trading myself but in the end, the chart behaviour rules my trading system. In the next few posts I will be hashing through the many maxims and trading lessons that I have found to be true from my own trading experience and that other traders always seem to crow about in various books, seminars and tapes. So stick around, I hope you will pick up a few new tips.

Depend on the numbers not the news

This may be a contradictory statement to the above about hybrid trading, but don't fall into the trap of depending on the news too much if you are trading technically.

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.

All traders are after the holy grail of share trading. If you are trading and not seeking that holy grail of trading, well what are you after? Are you after excitement? Are you after an adrenalin rush? Anyway, as I've established before, the markets is all about making money, and to make money you need to be profitable in your share trading. So I'm going to assume from now on that all share market traders are in the markets to make a tidy profit. And therefore all traders are after the holy grail. And some may have already have found that holy grail of trading stocks in the markets.

For a professional athlete to perform their best and to minimise long term damage or short term strain, they need to do a set of stretching exercises. Flexing their joints and stretching out their muscles. For the professional trader, I think it is important for us to stretch our skills before we get into any 'strenuous' trading. With the athlete, by not stretching they risk their level of performance in that race, and in future races. Conversely, I found that from my own experiences, if I hadn't done a few trial trades or "trading exercises" before I hit my "trading groove", my trading would be seriously stuffed.

Whether you are a day trader, or a forex trader... whatever - you may already watch the news and read the stock market news regularly. But what I found the hardest to do - the most challenging thing to do was to read between the lines. How you interpret the news is a vital element in successful trading. Sure, it isn't critical to your success if you already have a successful trading system. But it sure is a bonus if you can read the news and interpret it so that you can make a trading decision based on that interpretation. Experience as well as confidence plays a large part of this news interpretation - reading between the lines.