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Forming a Trading Strategy

Consistency is the main goal a Trader should have.

Forming a trading strategy is one of the most important things to do before starting to day trade or invest in anything. In fact, it is so important, that before every trade you make, you should be reviewing your strategy and seeing if your current trading plan lines up with it.

How do you come up with a trading strategy?

Coming up with a trading strategy should be something that is taken very seriously. In order to do this correctly, you should have a couple of things figured out.

First, what is your end goal?

What do you want to accomplish by trading? Do you want to have a certain dollar amount by a certain time? Do you want to generate weekly income? Do you want to grow your retirement account?

Being able to answer these questions will allow you to start your strategy off because you now know what you want, allowing us to work backwards from there. At ChartBulls, our goal is to generate 1-3% profit a day in whatever asset we are trading. This is a minimum goal and might not seem like much, but when paired with consistency and compounding, can generate a lot of income quickly. We have found that it is much easier, and probable, to generate these small percentage gains than it is to hit a homerun 10% gainer every day. We are in for the long run, so pairing these small daily gains leads to fantastic results when looking into the future.

Being consistent is the hardest part about trading, but also the most important. We need to be consistently profitable. Bringing your consistency to an achievable goal will help you eliminate emotion and allow you to perform your strategy.

Next, learn your risk tolerance.

This is very important because you will need to know if it is too risky for you to enter a trade or not, no matter the technicals. You will also need to learn what your risk factor is so that you can learn when you should cut your losses on a trade. Being able to define this risk level for yourself will allow you to trade emotionless and really follow what the money is doing. Another step to consistent profit. Risk factor is something that only you can figure out, but basing it on disposable income that you can live without is a great way to start.

Lastly, you must include continuous learning in your strategy.

No trading strategy is perfect. We always think that we find the perfect set up or asset to trade only to find a trade where nothing goes as planned. It is important to walk away from a losing trade with a mindset of learning what you did wrong, so that you can never do that again. Trading is about constantly refining your skills and knowledge so that you can be consistent. Be a consistent learner so that you can be consistent with your profit.

I invite you to come learn your Trading Strategy at the ChartBulls Trading School and group chat. We promote finding a strategy, executing, learning, and then repeating. We look forward to trading with you.

 

 

Understanding Day Trading Terminology

Day trading stocks and cryptocurrency can seem like an intimidating challenge to take on, maybe even impossible.

While there are lots of things to learn and understand like charts, volume, and patterns, one of the initial challenges is understanding the terminology of a trader. Being able to understand this terminology will allow you to be able to join a group setting or watch a video and know what is being talked about.

This list of terms will allow you to have a broad understanding of market, as well as charting, definitions. As always, this list is not all encompassing. There will be new words made up to describe things or even old words that are not used often that come up. In these instances, follow the old saying, Google it. Google will be your best friend while learning to trade.

Market Words

  • Cryptocurrency (Crypto)– a digital asset that is able to be traded or stored as a currency. An example of crypto would be Bitcoin (BTC).
  • Fiat– The real money that you are using to buy your crypto (i.e. US Dollars, Euros, etc.)
  • Exchange– a place where crypto is bought and sold between multiple parties. The exchange is the one who is helping each trade take place. A popular exchange for crypto is Binance.
  • Market Order– a market order means that you buy or sell your asset to the first available bidder. This will allow your order to buy or sell to be filled immediately, but could also cause you to not receive as much money as you wanted.
  • Limit Order– a limit order means that you put restrictions on how much you are willing to buy or sell an asset for. This will allow you to dictate the exact price you will pay or receive, unlike a market order, but could also mean that you won’t be able to buy or sell an asset. If the price moves to far up or down without hitting your price, you will not be able to purchase the asset.
  • Stop Loss– a stop loss is a way of mitigating risk. You are able to set a stop loss a certain percentage or dollar amount under the price you bought the asset at. This will allow you to sell before taking any more losses. If you set a stop loss $10 under the price you bought at which was $50, then the exchange would automatically sell your asset if the price hits $40.
  • Order Book– the order book is a listing of all the limit orders that are currently placed. This helps you see how close your order is to being filled.

Analysis

  • Technical Analysis– using charts and patterns to systematically dictate where the price is most likely to go
  • Fundamental Analysis– using the company, roadmap, promises for the future, or company leadership to dictate where the price is most likely to go
  • Bull or Bullish– the price of the asset is trending up or expected to trend up
  • Bear or Bearish– the price of the asset is trending down or expected to go down
  • Going Long– entering a position with the anticipation that the price will continue to go up
  • Going Short– exiting a position with the anticipation that the price will continue to fall so that you can then buy back in for a lower price. You can also go short by selling shares with the promise to buy them back later, hopefully at a lower price. This is like trading in reverse and is not supported by every exchange at this time.
  • Channel– made by connecting the high points of a graph using a line and then also connecting the low points of a graph using a line. This helps you decide if the price is more likely to go up if it is close to the bottom of the channel, or if the price might go down since it is at the top of the channel.
  • Flag– a flag can be both bullish and bearish. A bullish flag means that the price is most likely to continue up, while a bearish flag means that the price is most likely to fall.

Now that you are familiar with some of the wording behind trading, come join the free group chat to start practicing the language of the Trader!