5 Steps to Producing a High Trading Win Rate

There’s nothing I like more than somebody putting in the time and effort so they can better their financial future. However, getting started on the right track is key to keeping your portfolio safe while you learn.

So today, I want to talk about some things that may be overlooked when running a similar operation to what we do here at Option Strategies Insider.

First and foremost, you should be monitoring several different trading scenarios and trying to predict what comes next. If you can successfully predict the stock movement over the next week without having money in the trade, then chances are you have a strong understanding of what the future holds.

Predicting stock movement doesn’t necessarily mean one scenario. You should be outlining several possible trading setups by following a trading journal. For example, if A happens then expect X, if B happens then expect Y, if C happens then expect Z.

If A happens and something other than X is to follow, you don’t have a good beat on that particular stock or sector. That’s pretty normal… Being able to predict stock movement accurately has been something that investors fail at every day.

This is why we want to track many sectors, as we only need one accurate prediction to succeed.

Second, don’t be overly aggressive. It can be tempting to continue throwing money into the market to make big profits, but you must ensure the risk warrants the reward. A more conservative approach will mean you miss out on possible winners, but I guarantee you’ll also miss out on plenty of losers.

The number one rule in this game is not to lose money. Remember, if your portfolio takes a 50% loss, you now have to make 100% on the remaining balance to get back to even. Basically, it’s a lot easier to lose money than it is to make money.

So your first concern should be not to lose money.

Third, you should be using technical tools to help you achieve success. Our longtime readers know we like to combine several indicators with helping create a picture of the future. No matter what anyone tells you, there is no magic bullet indicator. Everything you have at your disposal is just one tool to help shape what will likely come next.

RSI, Fibonacci, simple moving averages, volume, and MACD are some of the most popular technical indicators, but in reality, that’s only a small handful. There are endless indicators that might be relevant at any particular time.

Forth, you have to know how to interpret all the data. Drawing lines, understanding stock patterns, and accurately numbering wave counts are where we like to focus our attention. This can be easier said than done and often takes years to master. We also combine these procedures with time factor methods, allowing us to see where elements line up and possible inflection points we can exploit.

Fun stuff, right?

Finally, understand that the goal of any trader is to make money. I’ve seen traders buy something for $1.00 and, a few days later, sell it for $2.00, generating a 100% return, only to beat themselves up because they could’ve sold it for $2.50 if they just would’ve waited a little bit longer.

That’s always going to be the case! If you think you’re going to be able to buy the absolute bottom and sell the absolute top, you’re living in a fantasy world.

The goal is to make money, and if you can make a substantial return over a short time, then it’s best to take your profits when your expectations are met. You can then take those profits and repeat the cycle again and again.

Of course, you want to use your technical skills to understand levels, but don’t push your luck when you have a big win. Anything can happen at any time in this game, and keeping a trade that’s already seen substantial profits so you can make a little bit more may seem like a good idea until, finally, you have one of those big wins get completely wiped out.

It will eventually happen… I promise.

There are endless ways to trade in this business, so no matter what approach you choose, know it takes time and patience, which will eventually lead to experience, confidence, and profits.

Start Your Investment Journey on the Right Track

There are endless ways to trade the market, so finding the right financial approach can be a tall order. Learn how we trade by taking our free options trading course and see if our 90% success rate is a match for your financial interest. Start achieving your goals, get started now.

Chris Douthit
Chris Douthit

Chris Douthit, MBA, CSPO, is a former professional trader for Goldman Sachs and the founder of OptionStrategiesInsider.com. His work, market predictions, and options strategies approach has been featured on NASDAQ, Seeking Alpha, Marketplace, and Hackernoon.