Earlier this week, we started talking about the one thing that you absolutely cannot be a successful trader without.
That, of course, is a trading plan.
We also talked about some of the elements that make up a good trading plan…
One of which is your specific trade strategy.
Now, there are countless different strategies to accommodate all the different instruments and styles of trading out there.
But for now, we’re going to focus on fundamental strategies for stocks and options, since that’s where many traders begin their journeys.
But, before we can begin breaking down the specifics of stock trading strategies, there’s one critical question we must answer…
Just how active or involved in your trading do you want to be?
This single question will have a major impact on developing a strategy that you can… and will… stick with.
See, many beginner traders unwittingly set themselves up for failure by committing to a strategy that is much more time-intensive than they realized…
Or they understood the time commitment involved, and underestimated their ability to maintain such a rigorous trading schedule on top of their other commitments and responsibilities.
So, in order to set yourself up for success, it’s imperative to understand exactly how much time you have — and are willing — to commit to trading before you decide on a strategy to approach the market with.
Now, one primary consideration in determining how much time you want to commit to trading is your trading goals.
For example, if your goal is to replace your full-time income so that you can quit your day job and trade full time, then you’ll need to treat your trading accordingly.
On the other hand, if you are only looking to supplement your income and enhance your retirement fund with trading, then you may take a more hands-off approach.
It’s also important to understand the distinction between trading and investing.
The big difference here is that trading is an active practice…
Whereas investing is passive.
For instance, buy and hold is a popular investment strategy in which an individual buys a security and holds it for the long term.
Buy and hold investors are not concerned with daily, monthly, or even yearly fluctuations in the markets…
Because their strategy is one that is designed to grow their portfolio over many years.
Now, buy and hold is a great strategy for folks who are starting out with investing at a relatively young age and have many years ahead of them for their account to accumulate those returns.
However, as we mentioned, buy and hold is not technically a trading strategy…
And if you’re someone who is a little closer to retirement, or you simply want to take advantage of shorter-term price movements to build your account, then buy and hold may not be for you, at least as a primary strategy.
(Remember: there’s no rule that says you can only use one strategy! In fact, many traders utilize multiple strategies that exploit multiple different time frames.)
For instance, position trading looks to hold an investment for anywhere from a few weeks to a few months, and is the closest thing to buy and hold in terms of length of time in the trade.
On the other end of the spectrum, day traders who follow a scalping strategy may execute dozens of trades in a single day, sometimes holding a position for only a few seconds at a time.
Obviously, if you are following a scalping strategy, then you are committing to being at your trade station for the majority of the trading session each day…
Whereas if you are a position trader, you won’t need to spend nearly as much time glued to your computer.
Now, that’s not to say that there’s no time commitment involved in position trading, or buy and hold for that matter.
I mean, you wouldn’t invest your money into a stock for any length of time without having done some amount of research and due diligence, right?
That means you need to factor in time for this work, too.
Now, in future issues, we’ll discuss stock research and trade strategies in more depth…
But in the meantime, I highly recommend you check out our free training video on a stock trading strategy that is unlike any other.
Not only is this one of the most ingenious… and profitable… strategies I’ve ever come across…
But the best part is that all of the intensive research and due diligence is done for you.
That means all you have to do is place the trade with your broker…
Then sit back and watch your account grow.