Five Rules For Profitable Stock Trading
In this article, I am going to share the Five Rules For Profitable Stock Trading that I follow to consistently make money. Even though I couldn’t catch the bottom of the 2020 stock market crash, I still have been able to achieve more than 100% return in 2020 with a portfolio of about 100 stocks with gains in individual stocks ranging between 20% to %500. In 2021, my portfolio went up by 40% near the stock market peak in February, and currently, it’s about 20% higher. This year, I also started trading OTC stocks with a very small amount because OTC trading is very risky. I am having great success with OTC stocks which I’ll share in another series of posts.
It takes a lot of time to do the research, update and manage this website which I developed in 2017, but I am passionate about the idea of achieving financial freedom early without being a slave of a regular 9-5 job. My mission at SST is to spread and share knowledge about investing and stock trading so people of all ages & experience can become financially independent without depending on a regular 9-5 job or use this knowledge to build their side hustle. That’s the main reason I created my Instagram page @smartstocktradingstrategies and started posting on my youtube channel.
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Always Keep Emergency Funds Aside
- An emergency fund is money you set aside for an emergency situation and use it for what needs to be done.
- Keep emergency funds aside worth at least three months of your monthly spending.
- Trade with the money that you are not going to use in the near future.
Do Your Own Due Diligence
- Never Trade Solely Based on Someone’s Recommendation
- Do your own due diligence before buying any stock to maximize your returns.
- Why a particular stock is trading higher or lower? Research the company, its management, its assets, projects, financials, etc.
Manage Risk, Don’t Avoid It
- Risk is often associated with market volatility. The higher the risk the higher the reward is
- Know your risk tolerance and targeted profit range before buying stocks
- Before using the actual money open practice trading account/s or learn to paper trade
- Start with a small trading account and grow it gradually
Diversify Your Portfolio
- Diversification often equated to not putting all your eggs in one basket, is a tried and tested technique that mixes different types of investments in a portfolio to lower risk.
- By including investments that are less correlated to one another – or react differently to economic and market events – gains in some can help offset losses in others.
Have a Strategy to Manage Your Portfolio
- Most traders and investors are successful if they have good money management strategies.
- How long should you be holding stock for?
- How much profit you are targeting?
- What will you do if the market crashes?
- Learn technical analysis, learn to read stock charts to enhance your trading skills