Five Top Stock Market Trading Strategies

Dale Gillham, Chief Analyst and Head Trainer of Wealth Within

By Dale Gillham | Last Updated 21 April 2021

Without the right knowledge, trading can be overwhelming at the best of times, so what can you do to reduce your risk and ensure you have a high probability of success. While there is no substitute for a proper education when it comes to trading the markets, if you don't have the knowledge to consistently profit, I recommend these five top stock market trading strategies.

Buy quality over quantity

When it comes to investing your hard earned cash, it is important to always buy quality blue-chip shares. It doesn't matter whether you own one share or a thousand shares, it’s the quality of the shares you own that counts.

If you make 10 per cent on 1,000 shares in a penny dreadful stock or 10 per cent on 100 shares in a large blue-chip company, you have still made 10 per cent. That said, the probability of making money is much higher with quality blue-chip shares because they are more liquid and better managed, therefore, investors have more certainty of being able to freely enter or exit a stock.

Although contrary to popular belief, if you invest in top quality stocks and take a low-risk methodical approach to investing over the long term, nine times out of ten you will achieve far higher returns than if you try to beat the market by picking the next boom stock or investing in penny dreadfuls. This philosophy is often ignored because, as humans, we believe we can beat the statistics. But the truth of the matter is that most investors actually end up becoming a statistic. As I always say, when it comes to investing in shares, it is not how much you make on any one investment that makes you wealthy; it is how much you do not lose over time.

Set limits

Irrespective of whether we are in a bull or bear market, the biggest single mistake people make in the stock market is not selling a stock that is in profit or not selling when it is in a loss. When I present to audiences, I always ask who knows when to buy a stock and of course, the majority say yes, but when I ask who knows when to sell a stock, very few raise their hands. This is because, in my experience, individuals focus 80 to 90 per cent of their time looking for what to buy rather than managing what they own and working out when to sell stocks.

The main reason why people don't sell shares they are losing money on or shares that are in profit is because of their emotions. Unfortunately, people are fearful of missing out, particularly if a stock is in a loss, as they believe it will turn and trade back up, which is not always the case.

Therefore, I always recommend that you set limits by using an exit strategy if a stock does not perform as expected or if it has run its course so that you lock in the profits. While most people only worry when the stock they own is going down, if you set limits on managing your trading risk you will be more relaxed about what unfolds in the market. Given this, I recommend you set a stop loss before you enter a trade.

Don't speculate

As Mark Twain so eloquently stated: “There are two times in a man’s life when he should speculate: When he can’t afford it, and when he can”.

This statement holds true when it comes to the stock market, as there are only two things you can control and that is when to get in and when to get out because once you invest, the market is in control. Therefore, I always recommend waiting for the market to do something before you make a decision rather than speculating on what it might do.

That said, as many have experienced, if you trade without the right knowledge the market will eventually take your money. But if you gain a proper trading education, using effective stock market trading strategies, it will give you the confidence to enter and exit trades so you don’t have to speculate. Because it is far better to trade on confirmation, rather than speculation.

Say no to software

Another big mistake people tend to make when they start out in the stock market is to purchase software believing it will help them with their trading decisions about which stocks to buy and sell. While on the surface this sounds great, far too many spend their hard earned cash on expensive software packages that promise riches from very little effort or capital, only to find that this is simply not true.

There’s an old saying, ‘what a wise man does in the beginning, a fool does in the end.’

When I ask people about their trading process and what stock market trading strategies they use, I find that so many have followed the path of the 90 per cent who fail to make money in the stock market and few see their own mistakes. Indeed, the 90 per cent who do fail, fail to plan properly because they don’t gain a proper education.

In my book, if you want to be successful in the stock market, find out what 90 per cent of websites are promoting that traders should do and you’ll know what successful traders don’t do.

Use caution with marketing companies

A lot of stock market education is promoted by companies who are more involved in marketing than providing a quality education. Their tendency is to paint an overly positive view of trading by showing investors how much money they can make but never really providing a realistic view of how much they can lose by applying their trading strategies. My advice is to do your research and make sure you can qualify and quantify everything they say.

When it comes to the stock market, having the right attitude is critical to your long term success. So be clear about what you want to achieve and why, and commit to it.

A successful trader commits time and money to developing the right knowledge and skills, and gaining experience in the market. So, are you one of the 90 per cent or are you different? Being different means you have the foundations to become a great trader because you have learned to apply the right stock market trading strategies that work in any market condition.

My top 10 share tips will provide you with some great insights on the stock market, as well as dispel a number of myths and misconceptions in the market that hold many back from investing.

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Purchase my latest book Accelerate Your Wealth - It's Your Money, Your Choice, which is packed with a number of stock market strategies that will support you to become financially independent.

Alternatively, if you want to learn how to apply some powerful stock market trading strategies, so you consistently profit long term, review our accredited trading courses. You can also check our what our clients have to say about their success in the stock market by viewing their reviews and testimonials.