5 Key Strategies to Trading Success

Oct. 31, 2012 - PRLog -- The Australian sharemarket is now showing some signs of strength. The overall index is trading above its uptrend line and holding on to its support.

However, despite the trading and investing opportunities being presented by the markets, some people could be missing out on profits due to lack of strategy.

Justine Pollard, a professional trader and trading mentor, said, “The biggest key to success as a stock market trader is to know when to exit and to understand that you have no control over the market.”

Mrs Pollard, who is also the author of Smart Trading Plans, said that stock market trading is one of the most unpredictable yet attractive ways of making money.

“When starting out in the stock market many traders think that buying the right share is what will make them profitable,” said Mrs Pollard.

“But it is how you exit the share that is one of the keys to profits.”

As an example, she cited the case of ABC Learning Centres, which used to own and operate a network of childcare centres across Australia.

“If you bought ABC Learning Centres back in 2004 at $4, you would have been in a nice profitable position two years later when the share doubled in price to over $8,” Mrs Pollard said.

“A year later it was worth half its price again and a year after that it was worthless and disappeared off the stock market.”

In her mentoring courses and for her own personal trading, Mrs Pollard emphasizes the need for a clear exit strategy – whether you are making profit or taking a loss – she said traders must have a well-defined exit level.

Mrs Pollard’s Five Key Strategies for Successful Trading:

1.       Having stop-loss strategy in place, so you know when to exit a share

2.       Using a method to position size your trades, which determines the number of shares you can buy based on the amount you are prepared to lose on a trade

3.       Managing your total open market risk in the market at all times to ensure you are not over exposed when you first start investing

4.       Be organised and regularly track and manage your trades through a spreadsheet or software program

5.       Knowing when it’s the right time to add more money to a trade and buy more shares

“Your long term success as a trader depends on how you manage risk in the market,” Mrs Pollard said.

“You can’t be profitable in the market if your losses are larger than your profits.”