Over time, the markets constantly change. That means smart traders need to regularly evolve the strategies they use.
Thankfully, there are some core fundamentals in trading. Here’s a list of seven core strategies and techniques traders of all levels can build on.
#1. Watch Charts to Time Your Trades
If you look at day traders sitting in front of their screens, you probably notice that they almost always have a bunch of stock charts open.
A stock’s chart shows the recent price movements, key support and resistance levels, trend direction, and more.
When you day trade, you need to learn to time your trades so that you can ride the short-term price moves. So it’s important to keep an eye on the stock’s price action. The best way to do this is by looking at charts.
#2. Have a Trading Plan and Stick to It!
Think about building a house … You have blueprints. You plan for the whole project, including where everything will go and how it will all come together.
Smart traders also make a plan before they start trading.
A good trading plan will include nearly every decision that can come up while you’re analyzing and trading stocks.
That can include which setups you look for, which types of stocks you trade, how much you risk, where you place your stops, how you exit your winning trades, and much more.
It’s also a good idea to write down your entire trading plan. It may seem tedious, but having something to follow in the wild markets can help you stick to your plan.
#3. Having the Patience to Wait for the Best Setups
Average newbie day traders can often see potential trades everywhere. So they may jump in and out of all kinds of stocks hoping to make a profit. But that likely ends in a bunch of losses — and paying a ton in commissions.
Most professional traders don’t generally trade like this. Instead, they trade like a sniper.
Sometimes, that means sitting on the sidelines while you wait for the right risk-to-reward setup for your strategy.
If you can develop the patience to wait for those awesome setups, you’ll be well on the path to trading smarter.
#4. Try to Master Just a Few Setups
If you pick up a book on charting, you’ll quickly learn that there are a ton of chart patterns, technical indicators, and trade setups.
A lot of newbies think they need to try to memorize and know it all. Then they randomly look through charts for anything that looks similar to what they’ve memorized. So maybe they know twenty different setups or, but they won’t master any of them.
That can make for sub-par trades and add up to frustration.
Instead, start with learning a single trade setup. That may be a specific chart pattern or something you look for on the Level 2 quotes. When you find a trade setup that suits you, test it. Look at the charts and see how it performs. Maybe paper trade it.
Then trade only this setup. If your exact trade setup doesn’t happen on any given day. That’s OK. Just don’t trade that day.
By focusing on that single trade setup, you eventually learn to master it and internalize the pattern’s nuances.
A lot of successful traders only use a handful of setups at most — that’s what works for them. So take the time to find the right fit. You don’t have to master every move.
#5. Start Small
When learning to trade, you gotta learn to walk before you try to run.
What do I mean? When you’re just starting out, trade only small positions and only use a small amount of capital in your account.
There are plenty of stories of traders quickly blowing through wads of cash. They lose big money. And they could’ve learned the same lessons even if they’d only traded with a $1,000 or $2,000 account.
I think new traders should start trading with a small amount of capital and trade small positions. When you improve your skills, build confidence, and develop consistency, then think about upping your trading size.
#6. Do Your Homework
Some people (like me) hate homework and will look for any excuse to get out of it.
Now, don’t run away when I tell you this, but to be a smart trader, you gotta be comfortable with doing a bunch of homework…
And I’m not just saying this, but trading homework can actually be a lot of fun.
Your trading homework is done outside of market hours. It can include analyzing which stocks were the biggest percent movers and how you could have traded them. It can also be researching new trading setups, reviewing your track record and learning how to improve, working on your trading emotions, and so much more.
I can tell you that for me, doing my trading homework is one of the biggest reasons for my trading success. Find your groove and get comfortable with it!
#7. Learn From Other Traders
Trading can be a pretty isolated activity. You sit in front of your computer for hours each day. And often there’s no one to talk to about the crazy market action.
A big part of my success over the years has come from interacting with other traders … seeing what they’re doing and learning more about what’s currently working in the markets.
That’s why I recommend that you build a network of traders who you can relate to or join an online trader community. If your focus is trading U.S. stocks, consider joining Shewutrade, our elite trading community.
With Shewutrade, you can join me as I approach the market. I share my market analysis with members twice a day. It’s also a place for you to interact and share experiences with other traders in the chat room. Plus, you can attend regular cutting-edge educational webinars.
This can be a great way to get a crash course in day trading strategies and more. No more guessing at trades or even how to approach the market.
I honestly believe Shewutrade is one of the best trader educational resources around. Come and join us today!