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The next thing you need to do is know how much money you are going to
risk on the trade. When you enter the stock trade you need to make
sure you have an exit strategy and have set your stop loss. A
successful trader will use percentages not money gained or loss to
analyze the trade. You can figure this by what percentage you are
willing to risk and how much profit you want to make on each trade.
Somewhere between 2 and 5 percent is a good starting point.
When you have all your parameters in place it is time to pull the trigger
and make the trade. Once you have made the buy write it down in your
trading plan to study later after you have excited the trade. Now that
the trade is in place you need to look at where you want to hit the
sell button. As a profitable trader you do not want to get greedy.
Take a look at where you see resistance check your level II to see
where the sellers are stacking up. If the trade is moving in a
positive direction it is time to set up a trailing stop.
It is now important to keep as much emotion as you can out of the trade.
Emotions will cloud your thinking and make trading even more
difficult. Instead of emotions you should learn and start to use
different chart indicators to follow your trade. Chart indicators such
as Bollinger bands and trend lines will
allow you to understand the movement of the trade. They are not used
to make you buy and sell but help you determine how the trade is
reacting to the markets.
Supply and demand levels or support and resistance are the best
indicators for you to make the buy or sell when trading stocks. Being
able to deal with the losing trades is important. This is a big
difference from successful traders and ex-traders. In fact, it has
been shown all the time that it’s not the trading system as it is the
trader’s ability to maintain the proper mental discipline and keep
emotions out of the trade.
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