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Posted by administrator on March 3rd, 2015

We prepared this article for those who are looking to learn how to trade stocks, or an experienced trader looking to get back to some stock trading basics. First of all, a successful stock trader looks for opportunities to make money in the stock market — period. There are many ways to do this, but we like to focus on the highest probabilities and ways to do this. The trader always looks for a way to predict which way a stock will move. To do this you must not only learn the stock trading basics of support and resistance, trendlines, chart patterns and price action / volume, but you also must learn to trade with the tape.

Stock trading basics can only get you so far in this business so let’s discuss trading with the tape. Now, support and resistance work very well IF a trader trades them under the right circumstances. For example, if the stock market is bullish and moving upward, it would be highly probable that buying bounces off of support and trendlines would be profitable. Likewise, buying breakouts on heavy volume would be a good idea. However, trying to short the market would be a bad idea most of the time. Remember, the trend is your friend. To get back to stock trading basics, just as buying bounces and breakouts in an uptrending market works well, you should look for opportunities to short trendlines or downside breakouts, in a down trending market. Don’t try to fight the tape, stick the highest probabilities. This is what we mean by trading with the tape.

Now that we’ve discussed trading with the tape, here are some other stock trading basics that will help you remember the most important elements in trading.

1- Paper trade until you are confident that you win more than your lose. A successful trader should be right roughly 70% of the time.

2- Try to keep your profit/loss ratio at 3:1. If you can be right around 70% of the time, and let your winners run 3 times farther than your losses, you will make money. It’s as simple as that.

3- Keep a trading journal. There is no way to know if you are meeting the above criteria unless you track all of your trades in a log.

These stock trading basics will be responsible for over 50% of your success. Once you learn to trade the highest probabilities, then you can focus on the other mundane things like trading platform, broker, strategies and other things that won’t have as much of an impact on your success as the stock trading basics mentioned above. For more lessons, go to our free stock lessons section.