Online Trading IndexEverything You Need to Know for Smart Trading

Since early December 2008, the stock market has been essentially flat. Of course there have been ups and downs, but if you look at the 40 day moving average, it’s pretty flat. It’s doubtful it will stay that way forever.No matter what your market prefrence is from stocks to Forex, it’s a great opportunity to consider how things have worked for you in the past and what you can do moving forward.

First, ask yourself why you trade in the first place. Why do you use the strategy you use? Do you just hand your money to a major broker and pray they will make you money? Does that indicate your underlying motivation is to not deal with investing… to run away and hide in the hope that your nest egg will grow. Maybe your preference is to open an account with an internet broker and manage trades on your own. Are you doing that for the
thrill of winning and losing kind of like gambling? Maybe you like to awe your co-workers with your trading knowledge. It’s really critical that you be aware of your underlying motivations. The ones beyond the knee-jerk response of wanting to make cash.

Now is the time to put together a winning trading methodology. Get ready for the upturn in the market. Here are a few tips.

No matter why you trade, you’ve got to separate your emotions from your investing. If you jump for joy when you make money and hang your head when you lose money, then you will find out that you lose and lose and lose.

Next, decide on your target objectives for trading. There are a few basic things to think about. How much effort are you ready to spend onyour investments? How much ROI are you looking for? How much risk are you willing to take on the money you invest… in other words, how much are you willing to lose? How much are you willing to spend on learning to invest? Come up with a statement of objectives in the form, “I am ready to invest ­­____ dollars and I am looking for a ____ percent annual return on my investment where I spend ____ hours per week/month managing my investments after spending _____ hours and _____ dollars learning how to invest.”

Next, come up with your overall investment strategy for moving forward. Are you going to put your money in a bank? Are you going to put some money into guaranteed municipal bonds and some into mutual funds? Get specific about how you intend to reach your objectives.

Before you actually invest a dime, you’ve got to have an investment plan. The investment plan defines when you will actually put your money into an investment and when you will withdraw. If you invest in a stock the plan tells you the price, the technical analysis features, and the fundamental analysis features that signal you should invest. Similarly, the plan tells you the conditions under which you should withdraw your money.

Successful traders follow their investment plans to the letter… and this is where the emotionless mind comes in. If you prepared your plan correctly, then if you follow it to the letter you will get the results that you seek. It’s really strange though, that most people stop following their plan. The winning technique consists of three steps. Follow the plan, follow the plan, and follow the plan.

After you exit the investment, then you need to do a de-briefing in your own mind. Take a look at what happened, how your plan served your objectives, and what you could have done better. With this simple analytical approach to investing you will be much more successful no matter what your overall investment strategy.

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