5 Trading Strategies That Work
Dear Penny Stock Millionaire,
Positions can be confusing when it comes to trading strategies.
A position is the amount of stock you buy or short. In other words, it’s the number that represents your investment in the security.
For example: Let’s say that you buy 1,000 shares of a stock at $5 per share. Your total investment is $5,000, but your position is 1,000 shares. You can change your position if it makes sense for your stock trading strategy.
Here, I’ll share my own trading strategies for adding to, lessening, and exiting positions.
You don’t have to mirror my techniques — instead, develop your own. Base your decisions on your risk tolerance and comfort level.
What Are Trading Strategies?
Trading strategies are your own personal rules and protocols. They dictate when you enter, exit, or change a position.
For instance, one of my day-trading strategies is to cut my losses as quickly as possible. If a stock turns against me, I exit right away to stop the hemorrhaging. Some people will keep hope alive that the stock will rally — and sometimes it does. I’m not willing to bet my money on it, though, unless I have a very good reason.
Trading strategies can also be based on chart patterns. For instance, if I’ve seen a stock go full supernova after a specific catalyst, such as a regulatory approval, I’ll watch for the same catalyst to occur again. When it does, I’m ready to buy because I expect another spike.
There are also specific trading strategies, which I’ll discuss more below, that help describe your trading style. I know lots of traders, for instance, who never hold a position overnight. They just don’t. Others refuse to buy into a position premarket or aftermarket.
This doesn’t mean those trading strategies are right. They’re just right for the individual trader.
Types of Trading Strategies That Work
If you’ve read this my issues before, you probably know that I’m primarily a penny stocker. I buy large positions in microcap stocks and snag my profits fast. That’s how a lot of my students trade, too.
When I’m teaching or mentoring new traders, though, I want them to know all the possibilities. Some people don’t like day trading or penny stocks. They prefer other trading strategies, and that’s fine.
Let’s look at some of the most common trading strategies and how they work.
1. Day Trading
Day trading is just what it sounds like: trading stocks between market open and market close. Day traders don’t hold their positions overnight — at least, not often — preferring instead to close out their positions before the market closes.
I’m a day trader. It’s a fast-paced way to take advantage of small or quick price movements. I also hold longer-term investments, but I focus on teaching people how to read stock charts, recognize patterns, learn from catalysts, and grow their wealth day by day.
The great thing about day trading is that it can work around any schedule. I might hold a position for just a few minutes or a couple hours. After I exit the position, I can either look for new plays or find another way to occupy my time.
Day trading strategies can also help mitigate risk. If I’m paying close attention to every play, I’m able to exit quickly if the price moves against me.
2. Swing Trading
Swing trading is similar to day trading except that the investor holds the position for longer periods of time. It could be two days or two weeks, depending on the situation.
There’s a little more risk with swing trading because a lot can happen overnight. What you thought was a sure thing can move against you because of an announcement that occurred halfway around the world while you were sleeping.
The goal with swing trading strategies is to pay careful attention to repetitive patterns. The more often a pattern repeats itself, the more likely it becomes to recur.
3. Position Trading
Position trading is one of the trading strategies that works quite well in a bull market, but often fails in a bear market.
It’s a step below long-term investing, which I’ll get into below, in terms of how long you hold your position.
A position trader might hang onto a stock for several weeks or months to let it mature. The goal is to profit off a long-term trend. Instead of looking at a few days’ worth of price movements, for instance, a position trader might analyze 200-day moving averages.
That’s enough for today…
But be sure to stay tuned tomorrow for the last two strategies you can use in your trades.
Talk to you tomorrow,
Editor, Penny Stock Millionaires