Successful Strategy: Engineered, Not Estimated
The only way to navigate the erratic nature of the stock market is to have a system in place. Without a clear plan, you’re walking off the edge of cliff and losing all your money to the big teams. To build a strategy, you need to know where you’re going to enter, where you’ll take a profit or where you’ll cut your loss. As difficult as it seems these things can be predetermined when you have the right tools at your disposal.
A little preparation goes a long way – take some time to study the behavior of different patterns you can see multiple examples on our Examples page. A good practice is to pick a particular pattern and only trade those to simplify the decision process. You will also become familiar with the behavior of that pattern overtime.
You’ve picked which stock, now you must decide where to enter the trade. PatternSurfer’s Dashboard gives you a suggested entry point for each trade after the pattern is formed. However, you may find overtime that you can get an entry level closer to the Stoploss which will further control the risk.
Discipline over Drama
It is vital to have only two possible exit points – at the Target price or at the Stoploss price. This sounds straightforward in theory, but we traders know the tendencies we have to exit with smaller profits or to hold stocks even when the price goes past the stoploss. Adhering to these levels is what sets apart successful traders.
The next part is the most important – your exit. You need to pre-determine your Target and Stoploss price When you enter a trade from the PatternSurfer Dashboard, these decisions are taken care of by model. The stoploss should be placed as an order as soon as you enter the trade. Your job as a trader is to commit to the levels, the risk-reward ratio takes care of making sure you are in net profit.
There is a third scenario where neither target nor stoploss is hit and you see the price dwindling about between the two. Based on your own analysis you should have a time limit for each pattern, i.e. if in ‘n’ days the price does not hit either one of my exit points, then I will exit with either a small profit or small loss. This scenario though not common, is very possible. Therefore, it’s important to have a predetermined time period set which will prevent you from exiting before the stock price hits the target price.
Bringing all these components into your own personalized trading strategy means you know exactly what you’re doing when you sit down at 9:14am. It may not completely eliminate your anxiety, but it will give you a structure to the craziness and increase your chances of making a net profit.
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