This checklist will help you get started with formulating a trading plan and determining what your style and goals are as an investor. The overall goal here is to move to a more managerial style of trading and stay ahead of trends, rather than chasing the market and reacting.
Step 1: Stock Market Outlook
Whether you are a day trader, beginner or professional, the starting point is to develop an outlook for the overall market. Is the stock market is in an upward trend, downward trend, or in a trading range?
Step 2: Bullish, Bearish, or Neutral Bias?
The second step is to know whether the assets you are trading, whether it’s a stock or an option, is Bullish, Bearish or Neutral Bias for the time horizon that you are trading.
Step 3: Support & Resistance Levels
The third step involves understanding Support and Resistance Levels for the time horizon that you are trading. That is, knowing what the Buy Signal and Sell Signal are by looking at the Support and Resistance Levels. The Tradespoon Stock Forecasting Tool can help.
Step 4: Correct Trading Strategy Selection
The fourth step is to select the correct trading strategy. For example, if you buy a stock, there is a 50% chance of it going up and a 50% chance of it moving down in the next minute or day. If you trade options, you can increase your Probability of Success to 70-80% based on your risk tolerance. Also, options allow you to improve the cost basis and pay less than buying shares outright.
Step 5: Trading Plan
The final and most important step is your psychology. Having a concrete trading plan can help you overcome the emotions when a trade turns against you. It’s important not to act out of emotion but remain rational and follow the trading plan. Tradespoon’s technology works to eliminate the emotional pitfalls and psychology from the trade, helping you to avoid making decisions based on fear and greed. By formulating and following a concrete plan, you can eliminate psychological impulses for getting in or getting out of positions. So effectively, not only do you have to be a disciplined trader, but also have technology backing you. And remember to ‘Trade Small and Trade Often’.
Stock Forecast Toolbox
Tradespoon’s Stock Forecast tool is designed to predict or anticipate how a stock’s price trend is moving in the short and long-term future. It relies on mathematical formulas of neural network technology, digital filtration and statistical spectral analysis for the final decompression of company trend from market noise. The Stock Forecast Tool allows a computer to attain information from a historical set of data, find a mathematical pattern and predict stock’s price trend for a time period of 10 business days up to 6 months. The goal is to maintain predictions with the highest possible accuracy. Figure 4 shows the 10-day forecast for EMC and expectations that shares will trend lower.
Tradespoon’s Expert Stock & Options Picks, ActiveTrader and ActiveInvestor services provide you with trade recommendations to help you follow our guidelines and become more successful. Our Seasonal Charts show you what the future looks like for the stocks, in terms of how the stock acts today and how it has behaved for the past 25 years. You’ll also be able to determine if there is any correlation between historical price movements and current price movements? We predict the support and resistance levels for next day to up to the next 75 days. Our Probability Calculator gauges the probability of the stock reaching a certain price point by a certain time range.
If you are trading stocks, we highlight the best candidates for trading and identify optimal entry and exit prices. If you are an options trader, we suggest how to execute a call or a put, and if you are spread trader, we tell show you the best options to trade. According to our statistical analysis, it is important to trade small and trade often as it increases the probability of success, just as the chance of a 7 coming up more often when rolling two dice. Also, it is equally important to follow guidelines in calculating the Return on Capital and knowing when to get in or get out of a position.