Are some stock trading strategies better than others?
When you trade the stock market or any other instrument for that matter, it is important that you have a good strategy. There are many stock strategies out there. Some are excellent, others not so great. You could of course employ your very own trading strategy.
A common belief is that a trading strategy needs to have a very high success rate in order to be successful. This could not be further from the truth.
This is where the risk/reward ratio comes into the equation. For example let's say that a stock is price 100. And that we are seeking 120 dollars. But we use a stop at 90. In this scenario, the r/r ratio would be 2:1.
If the risk/reward ratio is 2:1, you only need to win a third of stock trades to break even. If you won over 50% of your trades with this risk/reward ratio, you would make a very acceptable profit.
There are many different stock trading systems to choose from. Some traders like to invest for the haul. This is commonly known as longer term investing.
traders prefer to trade short term. Traders who open and close positions on the same day are known as day traders. If they buy and sell during very small time frames, they are known as scalpers.
Other traders like to keep their positions open for a few days to a few weeks. These are known as swing traders.
The type of trading strategy that suits you is likely to be dependent on the amount of money you have to trade and the amount of spare time that you have.
For those with hectic lives, a long term buy and hold strategy may be the best option as this trading strategy requires very minimal time.
There are many stock trading strategies for sale on the internet. Most of them are not good and best avoided. If these systems were really half way decent, the owner would be making money with them, not trying to flog them online.
Tags: investing, stock broker, stock trading, stock trading strategy, trading