Profitable traders can place money-making into the hands of their trading plan rather than their own influence. There are a variety of simple trading strategies used by professional traders and amateurs alike to produce big returns with minimal amounts of work. Once the money management part of a strategy is perfected, the rest can be left up to an automated trading program or to the strategy desk of your broker.
"Hands off" strategies are preferred by many mathematical trading experts because they take out the risk of emotion, and instead leave every financial decision to a simple, rational, and tested trading system.
Profitable traders use proven strategies and automated systems to produce a profit with very little work or risk. Back testing a strategy will tell you whether or not the system was profitable over a time period prior to current trading and give you a well established starting point for profit or loss expectations.
Many different trading systems
There are many trading systems that can be used to produce profits in any kind of market. Some trading systems, such as the moving average cross, are best with sideways trends. Others, like a momentum RSI trading system, work better in uptrend and down trending markets where small bounces can be collected as the market rises or falls.
Moving average cross
The moving average cross is one of the most simple "sit on your hands" trading systems available. With some creative techniques, the moving average cross can be used however you may wish with as many variables as you please.
When using a moving average cross, two moving averages of differing numbers are used. When the short term moving average rises above the long term moving average, a buy signal is initiated; when the long term rises above the short term moving average, a short signal is created. The moving average cross will show alternating buy or sell signals which work best in short run sideways trends. Uptrends or downtrends will eliminate the profit potential with a moving average cross because there will be several entry and exit points in one direction, while your opposite market positions will rack up little gain.
RSI as a momentum indicator
Using the RSI as a sole trading indicator is often unheard of other than for automated traders. With an RSI momentum strategy, the trader sets a certain RSI reading level to enter a buy and a sell. The creator of the RSI recommended that a reading of 70 was a sell, while 30 was a buy. Many professional traders set the bar higher with a 75 or 80 rating becoming a sell and 20-25 a buy rating. Higher numbers means that you'll take less trades, while hopefully avoiding the trades that turn sour.
Learn how to master day trading by downloading two of Trading EveryDay's FREE products: Tools of the Trade eBook and a Trading Plan Planner. Dedicated to helping people become profitable traders, Leroy Rushing, a professional day trader, trading coach, and author, is the CEO of Trading EveryDay, a distinguished provider of educational trading products and services. |
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