One question that is asked by many beginning stock traders is, "Do I really need a stock trading strategy to be a successful Stock trader?". This is essentially the same as asking yourself, "do I need a business plan to be a successful businessperson?" The answer is a resounding yes.
There is an age old saying used by the Boy Scouts that holds true in every field of study and that old saying is, "be prepared". There really is no substitute for preparation, especially in the unforgiving world of stock trading. At the risk of sounding like a broken record here's one more age old saying for us, "if you fail to plan, then you plan to fail". Are you starting to get the picture here? At this point you may be saying, "okay, okay, I get it, so how exactly do I go about using a trading strategy?".
Before get into the nitty-gritty of strategies let's define what a strategy is. The Merriam-Webster dictionary describes in simple terms a strategy to be, "a careful plan or method". The interesting part of this definition is the use of the word careful, which immediately brings to mind that a careful plan is one that has been given a lot of thought. This should be true of your stock strategy. It should be given careful consideration, a lot of thought, prior to its execution. Unfortunately, many people do just the opposite and the sequence of events for them is more like, "fire, aim, ready".
In order to avoid being in the, "fire, aim, ready" category we need to have a strategy in place before trading. There a number of components to a good trading method or system...and there may be a number of methods or systems within one complete trading strategy.
The entire point of having a stock trading strategy is to be able to trade successfully. In order for us to trade successfully we need to know what to do ahead of time. It may be easier for us to visualize the use of a stock market strategy if we think of it in terms of playing chess. Great chess players just don't sit down and shoot from the hip when playing. They already have a number of chess strategies in place and some of them are even tailored to the particular opponent there facing at the time. The chess player understands that not only do they have to defend themselves from their opponent's moves, but they also have to be on the offensive in order to win the game. They anticipate what their opponents moves may be next based upon a carefully thought out plan.
Just like the chess player a stock trader must play both offense as well as defense. He must protect his capital and control is risk while at the same time growing his equity. Successful traders already have a plan in place for those times when the market moves against them. They don't just make something up at the last minute, but keep a cool head and follow their strategy to the letter.
Nothing will give you greater confidence and greater profits than a successful Stock trading strategy. Profitable traders the world over could not realize their goals without one. To be among the profitable traders in the world make certain that you plan your moves before you execute your moves.
