Trading is all about building experience and getting better everyday. If you don’t look to improve your trading, chances are you won’t make it in this business. It takes a lot of dedication, but once you figure out ways to improve your stock trading, you’re well on your way to potentially become successful in the market. Successful traders know trading is a process, and they always want to build good habits. That said, let’s take a look at 5 ways to improve your stock trading today.
5 ways to improve your stock trading today
Now, these tips won’t make you a success overnight. However, if you practice these guidelines everyday, you should be on the right track to developing into a successful trader.
1) Journal and record all your stock trading
I can’t stress this enough. In order to get better in trading, you need to figure out if you’re making mistakes, if any. Also, when you journal, you’re able to figure out what trades you do well on. Consequently, you could maximize your winning strategies, and minimize the losing ones.
If you’re not already journaling, you should consider doing this. It’s pretty easy to do this. Take screenshots of your trades, then circle the points where you bought, sold and your stop loss. Also, you should write out your thought process. Once you’re done with the trading day, you should get right to journaling while everything is still fresh in your mind.
Here’s how you could journal your trades.
- Write out where you entered the stock and where your target was. Next, write out where your stop loss price was. Now, once you exit the trade, you should write out where you sold and whether it was near your target.
- Add charts and your thought process.
It’s that simple.
For example, here’s an entry from one of my journals.
I first bought 17,000 shares of Rexahn Pharmaceutical (RNN) at $1.67, which was within my buy zone between $1.60 and $1.70. I did a good job executing and was looking for a short-term trade in this for a pop to around $2. The execution was good on my part, but I did not size properly. I wanted to get into some more shares, so I ended up adding 5,000 more shares of RNN at $1.80 on a bull flag breakout. My average price was approximately $1.70 (still within my buy zone).
I was looking for RNN to get a pop above $2 and looked to stop below $1.40. The reasoning behind the trade was RNN had an upcoming catalyst, and this strategy tends to work for me (buying ahead of the catalyst, but you have to make sure it’s the “right” catalyst).
I sold RNN at $1.97, even though it went above my price target of $2 multiple times. Although I took profits and was able to make $5,300, I could’ve executed better on my exit and actually sold where my target was.
There were a few mistakes I made with this trade, and journaling trades this way will help me get better.
2) Write out your plan and try to stick to it
Writing a detailed plan is also an integral part to improving your stock trading. Having a plan allows you to better execute your strategies and could help to minimize your mistakes, while maximizing profits. Most traders are tempted to change their plan if they don’t have it written down. When you’re in the heat of the moment and you don’t have your plan in writing, chances are you’ll make more mistakes and either take a loss when you shouldn’t have or sell out too early.
Write down different scenarios for your plan. For example, if you’re looking to buy a stock at a certain price write that down. Also, write out your target and where you would stop out on your position, if you would add anywhere, etc. You should also write out scenarios that would cause you to stop out of your position. If there’s a new piece of information, you might consider changing your plan on the spot to avoid unnecessary losses. Similarly, you should write out different scenarios that would cause you to take profits.
For example, I write out all my plans for my trades and let the community of traders know exactly what I’m thinking and doing. They don’t necessarily have to be detailed, but if you’re new to trading, it helps to write out your entire thought process.
Here’s a look at one of my trading plans.
Pain Therapeutics (PTIE)
Upcoming catalyst events including Advisory Committee Meeting June 26th and FDA approval date later
Buy Zone: $7.50 to $8.25
Profit Zone: $9.50 or higher
Stop Zone: $7.00 or below
I write out my plans after filtering for stocks and then execute if they get to my prices. Keep in mind, you don’t have to write out your plans exactly like this, they could be more detailed. It all depends on your personality.
3) Avoid overtrading
Nearly every trader has suffered from overtrading, or churning, and successful traders will tell you to avoid this. Overtrading just eats at your account, and if your fees are a few bucks per trade, they’ll add up. You should be patient and wait for your setup to happen. Journaling and planning helps to avoid overtrading.
If you just throw on trades for the hell of it, it’s not trading anymore…It’s just pure gambling. That said, when you overtrade, you’re actually being counterproductive to your trading objectives. Just because you trade more, it doesn’t mean you’ll make more money. No matter the level of experience, churning leads to a lack of discipline, which would negatively affect your trading.
4) Look for help and mentors
The last thing you want to do is trade and try to figure things out by yourself. One way to develop as a trader is to learn from other experienced traders. You shouldn’t try to make mistakes on your own, especially if there are people out there who are willing to help you trade and have probably been through what you will go through.
Moreover, having a mentor means someone is holding you accountable. You could also lean on them and ask for advice. When you’re able to chat with successful traders, they give you their thoughts on your trade, which helps a lot. Sometimes you just need to write out your plan, and have people hold you accountable for times when you break your rules or don’t follow your plan. Additionally, it helps to build confidence when people give you props for sticking to your plan and profiting.
A chat room with successful traders is one way you could get help and find a mentor. All you need to do is share what you are doing, any problems you have and any strategies that are working. Once you do that, you could ask for feedback, which should help with your discipline and awareness. Becoming a successful trader is all about growth, and learning from mentors and other experienced traders will help you along the way. Heck, you even might be able to save some money and avoid common mistakes.
5) Continue learning
As traders, we should always strive to be better everyday. That means you’ll need to continue learning. Even if you become successful, you should look into other strategies that could potentially increase your profits. For example, let’s say you’ve got the hang of trading large-cap stocks, but want to venture into biotech stocks because they generally offer great risk-reward setups. You’ll need to seek out some of the best in the game who aren’t afraid to show you all their trades and account statements. You want to learn from traders who have already made it big in their career. That said, you don’t just want to pick up any old e-book or attend a random webinar. You’ll need to look for those who have showed consistent profits, that way you could continue your education in the stock market.
The bottom line, read books, attend seminars, take trading classes, learn from your mentors and continue to follow the markets. Moreover, you should study some famous and successful traders and their thought process.
Nearly every trader I’ve spoken to is always looking to improve their trading, but they generally don’t know where to start. Now, these tips are not the be all and end all to help you develop into a better trader. There’s a lot of work involved to become a successful traders, but these are among some of the most important ways to improve your stock trading today. You’ll need to be consistent with these tips, that means you should journal everyday, plan all of your trades, talk to mentors, continue to learn and be patient and avoid overtrading.
Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks.