Let’s Talk Strategy - Part 1
Before we proceed with details on creating a winning strategy, we must first confirm precisely what the definition of the word ‘strategy’ means to you.
The true meaning of the word strategy is a plan of action or a plan of attack for those of you who feel a bit more aggressive, using available trading capital and designed, developed or a molded trading strategy by an individual trader, day trader or short term investor in an effort to achieve a particular financial goal -- for our purpose of the use of the word, a specific path toward profitability as well as the art of making successful trades resulting in profitability on a consistent basis.
Part of a winning strategy is the ability of a trader to adapt to the various and more frequent than a trader would like, unknown or ever changing market conditions. Avoid the temptation to overshoot your ability to make a certain amount of profit whether it be per trade, per day, per week or per month. We all know what happens when you overshoot -- you lose. Also, when you overshoot, you waste the opportunity to make a profit and it’s senseless to waste your time as well as the effort.
It’s always best to aim lower and reach those lower goals thus, striking a positive note in your trading attitude as well as, developing a strong sense of success by reaching a goal. Take baby steps toward that ultimate trading strategy and you’ll find much more confident as you improve the opportunity toward reaching that targeted goal.
A potentially successful professional trader must realize it is foolish to set their strategy out of reach. It’s one thing to set a target as a challenge and a whole new game when the target is way out of reach. Always, and we mean for all time, a trader, day trader or short term trader should practice any strategy for a profit target while in demo-trading mode. There is absolutely no reason what-so-ever for a trader, day trader or short term investor to risk even a penny of real trading capital while they are working on developing a trading strategy. Demo-trading is the safe haven that all traders should utilize when developing or testing a new trading method. People -- that is what demo-trading is for, to protect your trading capital from the risks while developing, testing and trading a new trading strategy.
While working on fine-tuning that individualized trading strategy in demo-trading mode you should always work with the same value of trading capital that you intend to use when you switch to live trading. You don’t want to be demo-trading with $500,000 if your trading account is $100,000. Not only are you defeating the entire purpose by over budgeting a demo-trading account, you’re wasting a lot of time.
While developing your trading strategy you should only base your demo-trading trades on the value of your live trading funds. By doing so enables you to place your demo-trades based on the value of your live trading account thus, enabling you more of the real feel of your ultimate trading strategy. You will get the feel of making demo-trades base on the number of shares you can trade depending upon your available trading capital funds. You will get the feel of trading volatile stocks as well as the not so volatile stocks but -- all based on the actual value of your trading portfolio while not risking one red cent of live trading cash.
After you have made consistent, consecutive profitable trades over a period of time of possibly a month or more while deducting any demo-trading losses, then you should consider moving into your live trading account to begin trading, live. More on Strategy again, next month.