When you’re first learning how to trade, you need all the help that you can get. Whether it be from experienced traders in a community that could help you along the way or stock trading tips and strategies. Whether you’re swing trading or day trading, it helps to learn some trips and strategies that could be used interchangeably. Basically, nearly all successful traders have come to the same conclusion. That said, let’s take a look at some stock trading tips for success.
Stock Trading Tips for Success
No matter what your trading style, there are some common stock trading tips for success. For example, whether you’re a swing trader or day trader, you need to understand how to risk properly in relation to your account size. Additionally, you need to practice using and respecting your stop loss prices. Moreover, you need to learn how to cut your losses, be realistic and take profits. Lastly, you need to keep your emotions out of this game…The last thing you want to do is trade on tilt.
Sizing and Risking Your Trades Properly
When you’re trading, one of the important stock trading tips is sizing and risking your trades properly. If you size your trades too large in relation to your account size, it could be detrimental. That said, when you’re first starting to trade, start out small. Ideally, you don’t want to risk more than 1-2% of your account in any one trade. If you have a bad string of trades, your account is less likely to be wiped out when compared to risking 5-10% of your account for every trade.
For example, let’s say you have an account with $15K in capital. You would want to risk anywhere between $150 to $300 per trade, depending on your risk tolerance. Those who risk a large portion of their account per trade when they’re first starting out are setting themselves up for failure.
Respecting Your Stop Loss Prices
There’s a lot of controversy with traders about stop loss prices. Some may just want to watch their positions all day and exit when they see their position move a certain point against them. On the other hand, there are some traders who will use stop-loss prices and respect them. Now, when you’re a beginner, you want to practice using stop-loss orders. A stop loss is simply the price at which you want to sell a stock when you’re long and cover when you’re short.
However, there are some drawbacks to using stop-loss orders. If a stock is fast moving and you have a traditional stop-loss order, your exit price could be a lot worse than expected. You see, when you have a stop-loss order, it gets triggered if the stock reaches that price. Thereafter, you would get filled at the market price. That said, if you’re looking to sell your long position, the bids could drop and you could lose more than you expected. Again, when you’re first starting out, it helps to stay small since you’ll need some slippage when you’re using stop-loss orders.
Getting Out of Your Positions When You’re Down
Ever hear the saying, “Cut your losers quickly”? Well, successful traders do this all the time. This is one of the stock trading tips you need to keep in mind. A lot of the times, we fall in love with our positions and when they go against us, we might buy more in hopes of the stock rebounding. However, this could lead to larger potential losses. That said, if you’re down more than you expected, just cut the position and look for another trade. The last thing you want to do is hold onto a losing position and let it go against your risk limit.
Keep Your Expectations in Check
Chances are you’re not going to find the stock that could move 100% overnight. If you do, that’s great. However, you should not always be looking for home runs. When you’re first starting out, you do not want to swing for the fences. Rather, you want to stay in the game long enough until you get the hang of things. Your goal should be to become a consistently profitable trader, not to hit home runs. When you don’t keep your expectations in check, you let your winners run too long, and you end up losing when they pull back.
That said, you need to set a target price when you’re getting into a position that makes sense. For example, if you buy a stock and want to hold it for a week, you shouldn’t set your price target that’s 200% away. You should aim to make anywhere between 3-10% on your position.
Examples of Stock Trading Tips for Success
For example, when Kyle Dennis is trading biotech stocks, he keeps these 4 stock trading tips for success in mind. He writes a detailed plan and his thesis. He also has areas where he wants to buy, stop out and take profits.
Now, Jason Bond is not risking more than what’s comfortable for him. Moreover, he’s not risking more than he should for his account size. Additionally, he focuses on penny stocks traded on NYSE or Nasdaq because he can get a lot of size in those. He also has a tried-and-true strategy that has launched him to trading success.
When you’re first learning to trade, you need to take into account these stock trading tips for success. We’ve all been there, and it’s not easy to go at trading stocks alone. That said, practice proper risk management, respect your stop-loss prices, cut your losers quickly and keep your expectations in check.
Our Raging Bull Experts have been featured on: