After 15 years of actively trading the stock market, here are 6 things I learned that will help you become a much more consistent and profitable trader.
1. Trade only with fast-moving trends.
Our ability to profit from the stock market depends more on this decision than any other: ONLY trade long-term, fast-moving trends.
Your trading results depend less on the stocks you trade and more on how quickly those stocks move from one price level to another.
Fast moving trends allow us to accumulate profits quickly. It’s as simple as that.
2. Only buy stocks that show promise.
The second most important decision is this: you must ONLY buy fundamentally strong stocks that are also trending up, because they present you with the safest buying opportunities.
Buying a stock just because it is going up may work well for you. For a moment.
However, by limiting your purchases to stocks that are fundamentally sound AND whose value increases, your potential to build a profitable long-term trading business is multiplied many times over.
3. Use a proven input trigger.
Regardless of a stock’s fundamental outlook, or if it is trending up, always wait for a proven entry signal before committing your funds.
A candlestick chart signal like a Bullish Engulfing pattern is a classic entry trigger, and it’s something you can often rely on to get into bullish trends.
4. Confirm the uptrend.
By drawing a 20-period simple moving average on your charts, you have a simple method of determining the trend.
Never buy or hold a stock that trades below a 20-period simple MA. For clarity, I color mine GREEN in an uptrend and RED in a downtrend.
5. Take profit.
Trading profitably means that we must take profit. However, taking them too soon means that we can leave a significant amount of money on the table unnecessarily. To lock in profits, use what I call the “Thin Blue Line” indicator.
The thin blue line indicator is created by drawing an 8-period blue exponential moving average on your charts.
SELL on a close below the 8-period exponential MA, even if your 20-period MA is still green and rising.
6. Buy high, sell high.
After selling at a close below the 8-period moving average, BUY again at a close above your 8-period moving average, AS long as the stock remains above a 20-period moving average UP, you will which indicates that the trend continues to rise.
This means that you can enter and exit a long-term trend multiple times, but you will be out of the market when that trend inevitably comes to an end.