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How to improve your trading strategy and profit potential

by , 03 September 2015

A strategy is a vital part of trading.

By sticking to a strategy you know when you should be entering and exiting trades. It should include risk management. And it should also help keep your emotions from interfering with your trading decisions.

If you're looking to improve your trading strategy, here's one way to do it…

Only put trades on when the market is overbought or oversold

By only putting trades on when the market is overbought or oversold, you minimise the chance of the market veering off in the opposite direction. This is a great step to include in your trading strategy.

Think about it.

The numbers of buyers and sellers is about the same under normal market conditions. This means the price of the asset you’re trading could rise or it could fall.

But when there’s a sharp rise in price or a sharp fall in price, this equilibrium becomes unbalanced, Frank Hemsley in Five Steps to Trading Success explains.

Use these signals as part of your trading strategy

When the number of buyers in a market falls sharply, the market is overbought. Chances are with more sellers than buyers in the market, the price isn’t going to rise for long. Instead it’s likely to fall.

Take these indicators as a chance to sell.

It works the other way too. When the market is oversold, there are more buyers than sellers in the market. When the market is like this, look for opportunities to buy as it’s likely to rise.

This should increase your strike rate from trading and boost your profits.

So there you have it. How to improve your trading strategy and profit potential.

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How to improve your trading strategy and profit potential
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