There are few Golden rules that you can follow in your daily trading strategy in stock market so that you can avoid making simple and silly mistakes and make consistent profits in the long run.
Natural Laws of trading in stock market
First, Do not invest until the right entry point. Always wait for the right entry point to come so that entry point will become the confirmation of our strategy that it is working. Wait for one more candle to appear after the entry point and then use this confirmation to enter the market.
Have a full length trading strategy before investing. Do you buy a home without a plan? Do you plant windows, Doors, rooms where ever you feel like or follow a blueprint that an engineer gave you? Exactly! You should have a strong trading strategy and a reason why you want to buy or sell a particular stock. That strategy should be consistent over a period of time to confirm if that strategy is working. Remember the law of large numbers? if not, read this.
Price action strategy rules in stock market trading
Price action trading is about understanding the imbalance between buying and selling pressure so that you can identify trading opportunities and make a profit. It has his pros and cons. 2 different traders will draw different insights from the same candle chart because their interpretation will be different and their observation of the patterns will be different.
In your strategy, it is not possible to remove subjectivity completely. As per the above point, interpretation will be different for every trader because of subjectivity. You will want to minimize subjectivity in order to be consistent in your trading. So, trading strategy should be with low subjectivity.
Price action trading is not the holy grail, and it has its downsides. For instance, it’s impossible to perform an accurate back test, it takes a lot of time to validate a trading strategy, and there is subjectivity is involved.
Stock movement analysis and mistakes to avoid
News always does not dictate the stock movement. Moreover, news reveal details of the company based on the stock movement. Ask a reporter why a particular stock has moved up or down and they will give an answer for sure. Because news do not really dictate stock movement in 2021, it is the other way.
Trading indicators work by applying mathematical formulas to the price. So they’re slower to react, and that’s how you get the saying “indicators lag behind the market“. So, do not always rely on indictors completely. Follow price action trading practices.
Leave a comment if you want to share the additional rules you follow.
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