Developing a unique stock trading strategy is not that tough. Many novice traders have created their own trading system by using simple logic. In fact, they are doing well in the retail trading business. But some people prefer to use professional trading strategies which are sold online. The online trading system might be excellent but you will never get real benefit. As a trader, you have to curate your trading strategy based on your own personal preference. Only then, you will realize what it takes to become a professional trader.
To learn the proper way to create a professional trading strategy, you have to follow three simple steps. Once you stick to the steps, you should be able to create a professional trading strategy within a few weeks.
Open a demo trading account
In order to develop a professional stock trading system, you have to gain access to a risk-free trading environment. Never expect that you can create a trading strategy by using a real trading account. You might be a millionaire but there is no point in risking your real money in the learning stage. Try to understand how the supply and demand levels work in the trading profession. Check the price pattern at the critical zone. Once you do that, you will get a clear idea of where to execute the trades.
Some of you might think you can learn things with the low-end broker. But if you chose a bad broker to develop your stock trading strategy, you will never learn the proper way to use the advanced tools. You will be making silly mistakes most of the time and thus you will blow up your trading account. Visit this site and learn more about the high-end broker Saxo. If you feel satisfied with their offered demo trading environment, you may trade with real money also.
Developing your strategy
After learning the basics of the stock trading business, you have to work hard to create a professional trading strategy. Never try to create a trading system with tons of indicators. In fact, it would be wise to use the line tools initially. Try to find the profitable trade signals by using the support and resistance level. Once you become good at that, you should be able to develop the draft trading method. After that, you may integrate the trading strategy with few indicators to filter out the bad trade signals. Before you use the indicator, study the functions. Unless you know how the indicator work, you are never going to succeed as a trader.
Some people often think that have developed the perfect trading strategy within a short time. But remember, without back-testing the system, you can’t say that the system is working properly. Keep on trading the demo account for weeks and assess your performance. If you feel confident with your demo trading performance, you may assume that you have the perfect trading strategy to trade the market.
Developing your risk management policy
Professional stock traders are good at managing risk. Since no one can avoid losing trades in the stock trading profession, it would be wise to create a robust risk management technique. When you take the trade, stop taking the trades with high risk. Maintain a low leverage trading account so that you don’t have to lose a significant portion of your trading capital. As you become good at securing a low-risk trading environment, you have to define the risk factor per trade.
Smart traders never take more than 1% risk in the trades. However, if you start your trading career with small capital, you may risk 2-3% of your account balance. But do not take more risks. If you do so, it will be tough to accept the losses, and eventually, you will start revenge trading. Thus it won’t take much time to lose your capital.