Trading is all about the numbers. Professional stock traders tend to have a success rate of 80 to 95%. Retail traders on the other hand have a much lower rate at 50% or less. With such a pedestrian success rate, retail traders are unable to hold on to their profits for too long.
For retail traders who want to break free from mediocre profitability, here are 5 all important steps to maximize profits.
1) Develop your skill
Like any other profession, stock trading requires you to hone your craft. Start with the basics such as studying charts and reading indicators. The amount of profit you make depends on you well you trade the stocks in hand. Strive to improve your skill set and go the extra mile to amplify your expertise.
2) Be patient
Do not check the stock charts immediately after market close. Wait for a minimum of half an hour to ensure that you have all the data in your charts. This is because stock trading is growing in complexity with each year with numerous Electronic Communication Networks, stock exchanges, Dark Pool Alternative Trading System venues and several other Over-the-Counter platforms. Every trade must pass through the National Clearinghouses for documentation. In short, it’s a very lengthy and time consuming process.
3) Assess the Market Condition
Being able to read the market conditions well is a key characteristic of every successful stock trader. Once you assess the market conditions, it’s time for you to act. Things will not always go your way. Don’t wait for the conditions to be conducive for trading. You need adapt in accordance to the changing market conditions. If you fight the flow of the market you will end up with inconsistent results that lead to frequent losses.
4) Put your faith in charts
In stock trading, understanding the situation in the market can be quite difficult. It’s hard to get a clear picture at all times. You need to put your faith in charts. Use them to steer your way through a trade. When your stock indicators are weak, your trade is most likely to be feeble as well. Also, the price action weakens when the candlestick is shrinking as the run moves up. Be sure to not miss out on the intermediate term trend analysis. It will help you to attain a better picture of support and resistance patterns which will impact all trading styles.
5) Watch out for Market Participant Groups
The days of Main Street versus Wall Street have long passed us by. In modern day stock trading, there are 9 different Market Participant Groups. They all have their own order processing system and venue. Not to mention, each trades at particular times of the day or under market conditions that suits its style. They also have access to essential information at discrete times. They have differing capital bases and different motivations for trade. It is thus imperative for you to know whom you are trading to give yourself a better chance of earning handsome profits.
With these tips in mind, retail traders can have a better opportunity of growing their profits, improving their ROI (return on investment) and raising their capital bases.