Best Stock Trading Strategy Options for You

What does it take to create a stock trading strategy?  There is a lot that goes into creating any trading strategy, whether you are creating it to trade stocks, options, currencies or commodities.

The benefit of building your own strategy is the ability to make sure it fits your trading psychology.  To have a trading strategy that is successful it must fit your trading psychology, this is very important whether you build it or buy it.

There are literally millions of ways to create a trading strategy.  The type of trading that fits your psychology will depend on what type of strategy you need to build.  It is very important to spend a lot of time with this decision before you move to actually creating the stock trading strategy.  If you get this part of the equation right it will save you a lot of money and headaches.

There are several areas you need to think about before you start building or buy a stock trading strategy.  Here is a list of a few main things to get you started.

  • Trading Objectives – How much money do you want to make?  What other reasons do you like trading?
  • Type of Trading – Do you want to Day trade, Swing trade, or Position trade?
  • Time Commitment – How much time do you want to spend trading, researching, and monitoring?
  • Type of Securities – Do you want to trade Stocks, Options, Currencies or Commodities?

The answers to these questions can make a big difference of what to look for when you are building or buying a stock trading strategy.

Let’s use a sport analogy to explain.  Although generally all sports require athletic ability, each sport requires different skills.  For example a football player requires different skills than a basketball player.  While they both need to be able to run, it is more important for a football player to have sprinter speed to out run your opponent.

On the other hand it is nice for a football player to be tall but it is required for a basketball player.  The conditioning for each sport is also very different.  Basketball players are one the move throughout the whole game.  While football players have time to recuperate between downs and after the series.  You will never go to a basketball game and see an overweight player (Shaq in his later years is the exception).  On the other hand most linemen in football are overweight.  The reason for this is the different type conditioning and muscles that you use for each sport.  The same is true in trading.   If your brain has trouble watching the market all day and staying focused on the screen waiting for every little move then you probably need to create a swing trading or position trading strategy, NOT A DAY TRADING STRATEGY.  On the other hand if you can handle staying focused for short periods and longer term you lose interest, then a day trading strategy would work better for you.  The point of all of this is to explain how important it is to get the strategy in line with your trading psychology before you ever create the rules.

There are very few traders that can handle all the different types of trading strategies.  That is okay.  The important point is to learn what types of stock trading strategies would work best for you.  Once you figure this part out then you are further along your trading journey than most.  Continue reading the articles on this website to learn more about trading strategies and your trading psychology.