Monday, October 23, 2017
Trading Strategies

warren buffet stocks trading strategies

Do you know the Reason Why I wrote this article?

Stock-Options-Trader-failed-strategies

After getting tired and frustrated by searching “Trading Strategies” “Strategies for Trading stocks” “Stock trading for beginners” in Google, I came up with this idea to sum up all of the trading strategies at one place, so that my fellow traders and beginners like you will get benefited by the huge list of trading strategies in the Stock Market.

Do you want to become a talented and successful trader?

mohammed islam successful stock trader and strategist

Mohammed Islam, a 17 year old high school student and stock trader, he is worth more than 72Millions.

Yeah,,Boy.. Everybody wants to become a successful trader, but without knowing the strategies, steps, action plan, how will you become a successful trader?. One of my best friends used to suggest me to stay out of stock trading saying that I will come to street from losing all the money…

Why did he say that?

Because he lost all the money by trading without knowing all the strategies… I’m saying that he is a fool.. He started trading stocks, forex, binary options, etc. by reading some of the success stories written in CNN, Market Watch, etc. He used to search “how to become a millionaire by trading stocks, forex,and so on” on Google. Instead of searching for strategies, he spends most of his time in reading some successful event.

I don’t want you to fail in trading like my friend.. Yes. Of course. You need motivation stories to keep your hope of trading success.

Why can’t you just create your own success stories and own trading empire?

Here is the list of Strategies and must-do’s for trading stocks both online and Offline.

Do you want this whole list of strategies in a PDF?

 

Choose your Stock-Broker carefully and wisely

What I Really Do - Stock Broker-strategies

Choosing regular brokers is a key here, however the brokers can be divided into two categories. They are full-service brokers and discount brokers. For younger investors and beginners, discount brokers will be your best call, but Some people would suggest that the full-service brokers will be best fit for beginners. My suggestion is to go with discount brokers.

4 Things to have in your mind while choosing the best stock-broker.

  • Minimums
  • Margin
  • Withdrawal
  • Complicated Fee Structures
  • Supply and Demand Strategy

Generally, whenever there is a lot of supplies, prices will go down to beat the competitors, same applies to demand, whenever there is a lot of demand i.e more buyers are ready to buy. Price will go up. Use this point as indicators and decide accordingly.

Set price targets before you start trading

Are you buying the stocks for long-term? If you do, calculate the stop-loss level if you proceed further. Because the trade may turn against your instinct and calculation. Using this decision, your loss won’t affect you much than unexpected loss. If you find no loss, then go to the bar, have a beer.

Secret of Patience in Trading

patience stock trading strategies wwhite egret

It is easier to find men who will volunteer to die, than to find those who are willing to endure pain with patience. -Julius Caesar

If you ask the successful trader, “Do you trade daily?”. The answer will be BIG ‘NO’. They may be at the computer, watching the market news, signals, etc. But if they feel that there is no right opportunity to trade, they will wait until the right time and criteria meets.

Using the Sentiment as Strategy

Love What you do is the one of powerful statement preached by all the great leaders. Whatever you trade, whether its binary options, Call/Pull, short-term interest, commodity trading, etc, just use your emotion and listen to your instinct, you will get the right direction.

Disciplined–What it has to do with Trading strategies?

Being disciplined will help you to keep calm and meet both success and failure. This will eliminate the greed, which will induce us to trade more once win a huge trade. Disciplined behavior will help us to learn the things so quickly and helps us in executing the strategies.

Share Allocation Strategy

share allocation trading strategies

Share allocation is one of the basic strategy that every investor and stock trader should follow. For Eg: Buying tech company stocks for $1000 worth about $30/Share. Consider the broker’s commission also in your mind and calculate the least value of the stock selling price.

Do not be panic about Losses and Market conditions

fucking-panic-and-trade-successfully

As you know that stock market is one of the riskiest investment networks. Sure, there will be ups and down. Why worry about that the future fall and losing the present trade? Concentrate and trade well. Why do we fall? Just to learn from our failures. The more we fail, more we gain knowledge about stock trading. This strategy will come to naturally by gaining experience.

Beware of stock market scams

avoiding stock market scammers strategies

As Stock Market is money related business, many spammers try to exploit this opportunity to scam the people by shouting unreal or unimaginable things like 50% market return. More they try to sell us, more the problem involved with those kind of business. Beware of those scams and try to go with legitimate brokers and stocks, you can research on the internet to learn more about the brokers review and more.

When To Sell the Stocks?

sell the stock strategy

If you want to know when is the right time to sell the stocks, then you must update to date with News channel, news sites, blogs, market signal providers, etc. If you find a large volume on down swing, then you have to sell the stocks immediately.

Buy & Hold Strategy

This strategy is stressless and most powerful strategy used by all successful traders. May be we can say this strategy as Early Adopter’s strategy. For example: Take Microsoft, if you invested in it IPO in 1986 and hold that investment, now you will be a millionaire, but its 20years to turn $10,000 to 4-5Million USD.

Index/Pattern Recognition

You have to be completely thorough with Indexes and pattern recognition. Using these you can find whether the stocks go up or down. For eg: If commodity products go up, where would the stocks move? You have to be capable of predicting the stock’s value depending upon the pattern.

Breakout Trading strategy

breakout strategy 3triangle patterns stock trading

A breakout strategy is an amazing trading strategy used by most of the successful stock traders. This strategy was implemented in Forex trading, commodities trading, options trading and more. This strategy involves the process of studying the technical analysis for stock breakout based on two elements such as support or resistance.
Richard Koza explained very well with excellent illustration in his website. Take a look at his post.

This includes three setup strategies.

  • Breakout Setup #1 – MORPHEUS COMBO
  • Breakout Setup #2 – RELATIVE STRENGTH
  • Breakout Setup #3 – BLAST OFF

These 3 breakout setups were well explained by Morpheous trading Group.

Buy Stocks of the companies with a low Price- earnings ratio

There are tons of Companies out there with a low price-earnings ratio (P/E) make more profit percentage for each and every penny dollar you invest. But the companies with High price-earnings ratio won’t give more profit compared to the above. But there are some exception for this strategy too. The more the companies High P/E stocks, market expects more profit, if it lags then it will face a huge slap from stock market.

Harvey_Norman-low P-E ratio buy stocks

The beautiful examples of low P/E ratio stocks are QBE Insurance Limited (ASX: QBE), Washington H. Soul Pattinson & Co Ltd (ASX: SOL), Harvey Norman Holdings Ltd (ASX: HVN), United Overseas Australia Ltd (ASX: UOS), BHP Billiton Limited (ASX: BHP), Collins Foods Limited (ASX: CKF) and Ainsworth Game Technology Ltd (ASX: AGI). This list was provided by NineMsn

Strategy of Buying Stocks that pay big dividends

retracement charts stock trading strategies

This strategy was framed to get the maximum returns. The idea of buying stocks that pay high dividends is one of the best ways to get more returns. The study shows that the big dividend players helped the UK market to flourish in 1989. Image Source: www.stockcharts.com

Buy stocks companies priced below book value

Always traders and Investors fighting harder and struggling to determine which company is worthier than its booked value. This can be easily calculated by seeing the net asset reports.

The Strategy of buying Small caps rather than buying blue chip brands

This can be illustrated using Silicon Valley start-ups. Investors invest $100,000-$1MM USD in a start-ups which is then leads to billion dollar exit or IPO. The best examples are UBER, Facebook, Twitter and much more.

Retracements Trading Strategy

Retracements strategy requires a trader to have a unique type of skill sets, which involve the trader have to identify a perfect direction where the price is moving on, and a trader has to much more confident in his decision. Then the price will move in an expected direction, every trader will attempt to buy the stocks or sell the stocks depending the direction of price, using these pullbacks or retracements, successful traders will gain a huge profit.

Pullback trading strategy

pull back online stock market trading strategies

The Pullback trading trading strategy is mostly used in day-trading, it is used when the traders exited and settling for new low-risk stocks. When the traders were buying the low-risk stocks, Pullback strategy is implemented. See the example below. To know more about this strategy have a look at WallStreet Trading site.

Reversals trading strategy

How to use Reversal trading strategy? This strategy is completely based upon the technical analysis and indicators, this will be based upon the traders’ fundamental activities. When you find the markets tend to move in a particular direction, there will be a bounce back when it hits from the target price. These bounces have to used quickly to make good profit. This works well on low volume markets.

Momentum Trading Strategy

This type of trading strategies is fundamentally based upon the technical indicators such as MA(moving Average Indicators, Universal Oscillators, etc.
Position trading

What is Position Trading?

position-trading-stock-strategy-online

From the name itself we can understand the strategy, Position trading is very simple strategy and it involves momentum style of trading and eliminates the market entry importance. Here patience is more important, as trader has to wait for the right time and explore the opportunity by taking action when the price moves. Only difference between the momentum style and Position trading strategy is “market entry”.

Trending Value: Exceptional long-term performance Strategy

This strategy is working for more than 50years. MarketWatch explained this strategy much more detailed. This strategy involves the best practices like time-based investment, and continuing the winning strategies over a long time and earning a huge return. This is same like buy and hold strategy, and it uses the composite value factor. Many books and author mentioned this strategy as a winning strategy.

Factor can be calculated using

  • Price-to-Sales
  • Price-to-Earnings
  • Price-to-Book
  • Price-to-Cash Flow
  • EBITDA/Enterprise Value
  • Shareholder yield (dividend yield + rate of share repurchases)

Trend Reversal Trading Setup

This strategy completely depends upon the trend. If the trend reservesA trend either continues or reverses. Similar to a continuation trade, we must have an existing trend before looking for a reversal trade setup. However, instead of entering with the trend, we are looking for a reversal.

Mistimed asset allocation

This type of trading strategy was highly used by the American Association of Individual Investors. Survey result that members of the association were asked about their allocation. From the survey its found that the highest weight was given to Cash and lower weight given to Equity.

Short The Bounce Setup Strategy

Do you experience in Short the Bounce Set-up Strategy?

Lets see what is that,.. In flat or Down-trending stock market, everyone will be involved in selling the stocks and ETFs, after the breakdown of the market, we could face a huge support and bounce back to resistant market position. This strategy can be reversed in Up-trending Markets.

Market timing Strategy

Believe it or not, 80-85% of stocks following the direction of the market fluctuation and swing trade entries will also be in synchronization with the stock market timing model. This strategy can be combined with Short the Bounce set-up to avoid the losses in down-trending markets.

Clearly Defined Exit Strategy

If you are successful in buying and selling stocks at the right time, then you are not the successful trader. Buying and selling stocks at the right time is only part of the successful trader life.

We should have an exit strategy, for example: double our capital or reward-risk ratio at 3 to 1. Even if we fail to achieve our goal, we can employ firm risk control.

No black box trading strategy

Black-Box Trading is not at all a strategy, its nothing but computer programs which helps the traders and investors by auto-trading. They function themselves using the algorithm to buy the share when the key level of the index is higher and sell it when the key level is down trending. Buyer beware of these trading strategies and tools.

Monitoring The Fluctuations Strategy

If a trader buys huge volume of shares, there will be a positive fluctuation and changes in the value of the stock. This will provide you a short term profit, if you could sell them at the right moment. Tip: Many studies and survey shows that using long-term strategy will be more helpful and less-riskier return.

Avoiding The Hype

Popularity of penny stocks created a buzz all over the trader’s world. Initially this was highly useful for the traders, as they had huge return and less-riskier one. This was exploited by companies by selling the penny stocks to inexperienced investors in large scale, with a price higher than its actual one. The best practice is to do good research about the company, value, asset calculation, etc and decide about the investment.

Analyzing Volume strategy

When it’s comes to penny stocks trading, always go with huge volume of shares. Take this as thumb rule and have it in mind about avoiding the hype strategy too.

The Benefits Of Volatility

One of the amazing facts about the Penny stock trading is that, company penny stocks are more valuable than stocks and companies may be acquired by big fat blue chip companies. These benefits will give you a great return.

Technical indicators

Please have a look at our technical indicators page and charts.

Algorithmic Trading

Algorithmic trading involves following strategies.

Algorithmic Trading Strategy- Identify New Opportunities and Double-Check Your Analysis

Before buying or selling stocks you will do own analysis and study the indicators right? Wait a minute, Double check your analysis, whether it’s perfect or not with market opportunities.

Algorithmic Trading Strategy – General Tactical Approach

This is one of basic strategy that every trader must use this, Before taking any decision try use the forecast to predict the market swing. This approach will give you an idea whether to buy or sell.

Algorithmic Trading Strategy -Buy All Assets In The Forecast Of Equal Weights

This approach is one of the important most strategy, which involves buying all the asset in equal weights. This will help you to avoid huge risk. If one asset price goes down, there is a probability of another asset price going up. This strategy will give you an augmenting return.

Algorithmic Trading Strategy -Strategy of Buying stocks with Predictability Indicator Of 55% Or Higher

Iknowfirst gave great explanation about this strategy. Strategy is dependent fully on predictability Indicator, if the indicator shows 55% and above, buy the stocks.

Algorithmic Trading Strategy of Buying Stocks – Strong Signal In Each Time Horizon

If the same asset repeating itself in the 1-month, 3 months and 1-yr horizons, then it is a positive signal to buy the stock. Now just check the signal and predictability indicators to confirm positive signal.

Algorithmic Trading Strategy of Multiplying the Signal And The Predictability Indicator Together

If you are good at math, make your own indicator b multiplying the signal and predictability indicator. If the numbers are big, you will get a great sign to buying the stock.

Summary and final thoughts:

Now I have listed out most of the best practices and strategies followed by successful stock trader. I hope you might have benefited from this list. If anything is missing in the list here, please let me know through comments. I will add that strategy to this list.

 

What is a Martingale type betting?

A martingale is a betting method which is used as trading strategy in binary options which involves the increasing the amount of the initial investment amount at each loss we face at trading until a gain is achieved. This will give huge reward if we succeed at some point, what if we lose?? this method will lead us to BANKRUPT.!! Selling our beloved house, Car, doing dead end jobs.etc.

History behind Martingale Type Betting Strategy

The Martingale Concept in Probability theory was first introduced by PAUL LEVY in 1934, however the term MARTINGALE was not coined by PAUL LEVY, it was then coined by Ville in 1939. Usually, this type of strategies were most popular in the 18th century at France.

Why martingale betting doesn’t work

In my example, if you lose your transaction, this principle will invite you to repeat the same bet for an amount of €20. If your end up the trade at a loss, you should again bet the amount double than the previous one. In a few trades, the amounts to invest become astronomical and un-predictable. The results and consequences will be empty account or get lot of amount than we trade regularly.

martingale betting binary trading

Now see this Example in betting and find out why it does’t work?

The-Martingale-system-and-why-it-doesnt-work3

If you look at the graph plot given above, you can find out your successive bet will be around 5Grands..$5,000. In order to win back all of your losses. If you win the bet, your total calculated prodit will $10, come on guys..it is not $10Grands..its just 10bucks….

The Modified Martingale Strategy

I just came across this Modified strategy on a forum. If you are really wealthy enough to bear the loss, go with this strategy.

As with any other progression, it won’t overcome the house edge, but it can survive many more consecutive losses than the traditional Martingale and you can win a staggering amount from a single sequence. The system requires 1022 units and you’ll be able to survive up to 16 consecutive losses. In comparison, the traditional Martingale with 1023 units will only survive 9 consecutive losses. The progression is pretty simple… 1-1-2-2-4-4-8-8-16-16-32-32-64-64-128-128-256-256 units. If you lose a bet, go to the 2nd step and continue deeper with each bet. When you finally win 2 hands in a row, reset to a single unit. If you’re unlucky enough to lose 16 hands in a row before winning your last 2 bets of 256 units each, you’ll still end up with 2 units of profit. If your sequence ends up being -1-1+2-2+4-4+8-8+16-16+32-32+64-64+128-128+256+256, you’ll end up with a whopping 510 units of profit! The only way you’ll bust out is if you never win 2 hands in a row in the entire 18 step progression.
Image Source: www.cnbc.com

indicators binary trading-tendency

This Method involves the help of a monitoring tool usually its provided by the Online trading brokers or signal providers to give us Indicators of traders tendency. Also all the traders tendency won’t be true always.

Trader’s tendency indicators will show the % of traders choosing either “Call” or “Put”. Best example is shown in the picture below.

traders tendency indicators

 

Types of Trends indicators to win the trades.

  1. Trend Following Indicators
  2. Indicators to Confirm Trends
  3. Overbought and Oversold Indicators

Illustration for Trend Following Indicators and what should you do if you find on?

Trading-Indicators-using-the-Moving average-trend-options

 

In this category, popular indicators is the moving Average. You can use these indicator(Moving Average) to estimate another crossover between two moving averages.

What should you do should with this indicator?

Put Options: If you see Moving Average crossover follow an uptrend, go for Put options.

Call Options: If you see a bullish trend, go for Call Options.

Indicators to Confirm Trends

Binary-Options-Trading-Using-the-MACD-trends-indicatorsThis category has Powerful and most accurate tool, which is used measure the difference between two moving averages. Then the difference is plotted against a histogram to predict a forecast pricing direction for the traders. This Indicator is called as MACD(Moving Average Convergence Divergence)

What should you should do with this indicator?

If you see a BUY signal in the Moving Average Convergence Divergence, at the same moment if you see a bullish Moving Average crossover, CALL options should be used.

Overbought and Oversold Indicators

RSI-Trading-Indicator-binary options

In this category, Tool used is named as Relative Strength Index (RSI).

Consider a situation when an asset prices goes high and become too expensive to buy, people tendency will be not to buy that asset and sell immediately to gain the money invested in it. This kind of situation is OverBought Condition and PUT options have to be called.

Similarly, you can understand the situation for CALL options(OverSold).