How to Profitably Trade Stocks

Dear Trader,

Keystone Trading Group | NYC 2009

Keystone Trading Group | NYC 2009

I wanted to take my time answering your question because it deserves a good reply.

First let me say that trading for a living, for extra money, whatever your goal- is possible. With my own eyes I have witnessed too much success to believe otherwise.

So if that’s the case, why is the rate of failure higher than the rate of success?

The first reason that comes to mind is a lack of respect for the task at hand. Chart reading is not trading, the same as passing a written exam doesn’t teach you to drive.

If you can begin respecting the task, that’s a good place to start. Most people see a much further advanced version of themselves in the mirror, with no results to back it up.

Start small and stay small until results tell you it’s ok to get bigger. At least 3 months’ worth of net profits. Too many make the mistake of trading bigger because they had a good day or week. Trading is a business, don’t rent a 3,000 square foot office after a good week. Keep the one you have with your one desk.

Learn to read the tape. This means the big money is doing something obvious, and there is room to go. More money is lost on bored trades than you can imagine. Never trade unless your edge is there.

Learn when to be bullish, when to be bearish, and how to recognize relative strength or weakness.

Know from day one, that losing trades are expected, and if you are smart, they are feedback. A large sample of trades is a perfect reflection of your skill level. Work on one thing at a time.

Eventually it will come down to managing trades. This can only be conquered, if you learn great ideas. Learn when to trade for cash flow, versus when to build a position. I call this building an argument for accepting risk. The better the argument, the more reasons for the trade, the more conviction you should have.

stock trading today 7-6-16Most lose money because their arguments for the trade are weak. They should not have been in the trade at all.

These skills take time, but not as long as most believe. The problem is being disciplined, the problem is NOT knowing what to do.

Most never learn to trade for a large sample size. Most mistakenly trade with a focus of immediate results Each trade need not be a winner to be successful. Seeking trade-by-trade results is  the biggest mistake you can make. If you adopt a probability and feedback mindset, from day one, you have a great chance to succeed.

Trade fewer stocks but trade them aggressively. A list of 20 is good to create a daily game plan. From that 20 you will have 3-5 stocks every day. As you improve, expand the list.

Spend a lot of time understanding and documenting how to recognize tough days, and how to spot great days, and which trades to expect follow through (all taught in the course)

The more you can avoid bad trades, the better chance you have to succeed. To net profits trading stocks, is first about managing the bad ideas.

It’s not about whether you can. It’s about you, and can you follow the rules.

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Steve Reply

Do you trade crude oil? Can you read the tape for that commodity too. Let me know.

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