Turn temporary stock trading into a profitable activity

I've been trading for a long time and think every year that I don't make a 100% return on my small investment. However I am cautious and Idon't take big risks. How do I have my cake and am able to eat it too? So what exactly is my secret? I get into to a lot of trades (diversity). If you follow just those rules you will notice your trading having a quantum leap in profitability.

And since you're diversified and therefore are out of the trades in 2 or 3 days your risk is going to be low. I invest my trades in 96 markets on a website every day to prove my point, but if you don't believe the proof is in the pudding allow me to provide you with a little statistical theory here.

I'm a serious market researcher and one of the a few things i have seen is that a lot of market behavior follows normal distribution patterns. Exactly what does that mean? Let's explore a typical way of measuring market behavior, daily range. Daily range is just the daily high without the daily low. If your market constitutes a a lot of 66 along with a low of 61 the daily range is 5.

Now let's take 100 market days and appraise the daily selection of a theoretical market and assume normal distribution of range for all those 100 days. What we should find is that 68 days have ranges of 5 or less. 95 days have ranges of 10 or less. 99 days have ranges of 15 or less. But there's one day trip of the hundred having a selection of 40! Put one other way: For 68 days the number is 5 or less. However for 27 days the number is between 5 and 10. As well as for 3 days the number is between 10 and 15. And lastly on One day the number is between 15 and 40!

Whenever we trade options we use stops to limit our losses. As we buy 50 shares of XYZ at a cost of USD 50 per share and that we wish to limit our loss to USD 250 we'll make an order to market our 50 shares 5 dollars below where we bought or at 45 stop. Obviously if our stop is simply too shallow it will always be likely to get tagged and result in us always losing small quantities of cash with each trade. Conversely when the stop is simply too deep we will win more however when our deep stop finally gets hit losing may eliminate all of our gains.

Using normal distribution patterns is one approach we take to can set intelligent stops. While using hypothetical data above we all know that in two out of every three market days the number is going to be 5 or less. If we bought 50 shares at 50.00 we are able to set our visit 45.00, limit our loss to USD 250 and know that on a day we now have only one chance in three of getting our stops hit.

As we hold our trade for just 2 days you will find there's better than even possibility of escaping . of the trade without our USD 250 stop being tagged. And being once we aren't limiting our upside potential that means that we will make money even when we simply win Fifty percent of the time.

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Turn temporary stock trading into a profitable activity

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