The market’s always changing and evolving. And because of that, I’m gonna talk about the top five trading strategies you should look for in 2020.
So, as I talked about, it’s 2020, it’s a new year, amazing new possibilities. I’ve got the five things I want you to focus on most in this new year.
Trade the Ticker
First thing, is I think a lot of newer traders hear the old thesis of, and while, I’m not even saying old but, the kind of rehashed thesis of trade the ticker.
Who cares what they do?
Who cares what their fundamentals are?
Just trade price action.
And that’s true to a certain extent. But if you’re only a price action trader, there may just be long periods of time where there’s just not much going on.
And when you’re looking into those swing trades, those trades that aren’t necessarily spiking in one day, you’ve got to have some sort of way to be able to value this accompany and gauge your interest and decide, “Okay, do I want to buy this companyc” and let this trade work?”
So, learn the fundamentals. Learn to how to break down a cashflow statement. Learn how to break down a balance sheet and understand the underlying idea behind companies. Remember, many of these companies move because the hedge funds, the big investors, are trading off the fundamentals.
Doesn’t mean you have to always do it. But you should at least have some sort of basic understanding of what the underlying mechanics of a stock in a company are.
Table of Contents
Risk Management
Second thing I want you to focus in on 2020 is proper risk management, okay? Make a New Year’s resolution to really dial in on proper risk management. I think so many new traders, and maybe you’ve been there? Hey, I’ve been there when I got started, and you’re down three, four, $500 or $1,000 on a trade.
And then if it works, it’s a big if, if the trade turns back and works, and you make a hundred bucks, I mean that is not sustainable over time, okay? You might say, “Well, it’s a green trade, it’s a winning trade.” But you were down a thousand to make a hundred.
You’re gonna get lucky here and there. It’s gonna work every now and then. But over time, multi-month, multi-year, the math just doesn’t work. So, before you’re entering a trade, think about your risk. The one thing, basically the only thing you can control in trading is how much you lose.
You can’t control what the stock does. You can’t control what you make. You’ll have a plan for your goal, but only you press that sell or that cover button.
So before you enter a trade, think about the risk to reward. Use the chart to determine whether or not there’s at least a realistic expectation of a three to one risk to reward. Write that plan down and stick to it.
Have a Journal
Third thing I want you to do is have a journal. It is amazing to me how many traders aren’t taking down their thoughts, aren’t reviewing things.
Remember, this is, a lot of people wanna say it’s just mechanics. It’s just looking at the chart. It’s just pressing buttons. But there is an emotional battle going on in every trade and so much of this is you versus you. It’s that man or that woman in the mirror.
And I don’t think, especially when you’re in the heat of the battle, and trying to keep track of what you were feeling and what was happening and how you approach the trade.
I think you lose so much value by not writing things down. Now I get, maybe I’m a little old school and I’m not saying you have to write it hand-by-hand, but use software like Evernote is a great one, or OneNote or even just a text document or a Word document.
But write down what you were thinking, what you were feeling,
what happened in this trade, and then review it. I mean, the simple fact is, look at all of these sports.
You know, some of the peak performers in sports. They always talk about watching game film. If you’re in business, they’re reviewing the project. You know, if you did a construction project and it finished well, if you built a skyscraper and everything went well, you’re gonna review that, how the project management went down, how the scheduling went down.
So that you can repeat it next time. And vice versa. If you started the building and it fell over, you wanna know why? What did we miss? How do we not build a building that falls over when we’re 20% done?
And the only way you can do that is by reviewing your data, reviewing the steps. And trading’s the same way. And it drives me nuts, that so many talk about, you know the 90% that fail.
But, in my opinion, 95% of that 90% that fail aren’t writing, aren’t journaling and aren’t reviewing it. If they write it down, they ignore it the end of the day and they come back the next day and say, “How am I gonna make some money?” And then they can’t figure out how, why they have inconsistent results.
Cut Losses Quickly
Fourth thing I want you to focus on is, cut losses quickly. I mean, we trade in day trading land, in low price land, the most volatile stocks of the day. I mean, we love that, ’cause it gives you a potential to grow your account quickly, to make those big profits.
But, that sword cuts both ways. So if you buy this huge spikier, or even worse, if you short this huge spikier, they move both ways quickly. And if you don’t have a plan, and you don’t stick to that stop, things can get bad really fast.
I mean if you take, if you’ve got that small account and you lose $1,000 or $2,000, it takes you so long just to get back to break even. I mean if you’re winning a couple 100 bucks here and there as a new trader, that’s great.
Couple of 100 bucks here or there. You’re learning, you’re growing, you’re building your account. But you take that $1000, that $2000 thousand, and $3000 thousand loss, all of a sudden, you’re back to where you were six months ago.
The math doesn’t work if you take big losses. It just doesn’t. I mean, we’re all gonna to do it. If you haven’t taken that big loss, it’s probably coming. It’s probably, listen, that boogeyman is hiding around the corner at some point.
But, if you haven’t taken that big loss, when it happens, learn from it and say, “I’m never doing that again.” When you’ve hit that stop, and the stock is trickling lower, and you’re canceling orders to stay in, remember that time you took that big loss in this.
In trading, you either learn or you earn, okay? If you make a mistake, learn from it and do your best not to repeat it.
Not Going All In
Fifth thing I want you to focus on in 2020 is, not going all in, okay? I know it’s hard, especially if you’re coming to these articles. I’m glad you’re here.
Odds are, you’re new or you’ve got a small account, and I know it’s so tempting. You know you want to go all in, because you don’t wanna take the $50 gain or the $100 gain, or the $200 gain.
But like I said in the last step, those big losses are so crippling for your account and your mentality. I mean it’s hard. It’s hard to bounce back from a big loss. So when your mentality, your emotions, and your account are beat up, beat down, you’re gonna struggle and it’s gonna be hard to recover from that.
So, the simplest solution, and I know you’ve heard it a million times, but it’s always the number one rule, take those small losses. Don’t go all in, because the more you go all in, the higher, the faster the losses grow. And especially like with margin, I mean, you’re free to do whatever. But if you’re going all in on margin as a new or intermediate trader, it’s gonna end badly.
I mean, maybe, maybe you’ll make it work, but 99.999% of traders that are going all in on margin fail. That is not why margin is there. Margin should only be used, you know, first of all, when you’re consistently profitable. And it should only be used to add to winners.
New traders use margin to add to losers. They blow up and the cycle repeats. So don’t go all in.
So that being said, drop me a comment below,I’ve done it, we’ve all done it. I’m curious if you’ll be honest enough.
Have you gone all in on a trade?
Have you gone all in on margin?
Let me know below! I promise I won’t yell at ya. We’ve all done it. But I’m curious, have you gone all in?
