It is no secret that most new investors lose money in the stock market. Statistics show that over 80% of new traders fail in their first year. The number one reason for this is simple: they do not have an expert investment strategy to follow.
This does not mean you need a PhD in Economics or Finance to be a successful trader. However, it does mean that you must have a solid plan to guide your investment decisions. This is where established trading strategies come in.
Importance of Established Trading Strategies
A new investor might feel intimidated by the world of trading and investing in the stock market. The endless stream of financial jargon, complicated charts, and insider terminology can be off-putting for someone new to investing.
It’s easy to understand why someone new to trading may adopt a cautious approach when investing their money. However, as with any field of work, there are safer strategies that you can adopt as a new investor.
Established trading strategies have been around for decades and have stood the test regarding successful investing. They also offer much smaller learning curves than other more complex techniques often reserved for seasoned investors with a firm grasp on market dynamics and technical analysis.
With that in mind, here are some reasons investors should adopt established trading strategies.
1. Save Time And Energy
One of the best things about established trading strategies is that they can save time and energy. Starting, knowing where to look for opportunities and how to evaluate them can be challenging. But when you follow an established strategy, all that work is already done for you.
Executing the trades is all that is required. This can free up much of your time to focus on other things, like learning more about investing or growing your portfolio. Of course, you still need to do your homework before putting any money on the line. But following an established trading strategy can help you get on the right foot.
2. Safeguard Your Investment
There are many reasons why new investors should adopt established trading strategies. The most important reason is that it will safeguard your investment. An expert investment strategy does not only guide on when to buy and sell stocks.
It also includes risk management protocols to limit your losses in the market. This is crucial for new investors who are often inexperienced in the market and prone to making mistakes.
If you’ve just started trading and investing, your ability to forecast how the markets will react is minimal. Even the most seasoned traders can’t predict the markets with 100% accuracy.
The inherent risk that comes with investing your money in the stock market is something that new investors often overlook. However, if you stick to an established trading strategy, you’ll be able to mitigate most of the inherent risks associated with your money.
3. Reduce Your Risk
When you put your money into stocks, you’re essentially gambling on the company’s success. You make money if the stock goes up; if it goes down, you lose money.
Many factors can affect a stock’s price, making it difficult to predict the future. This is why it’s essential to diversify your portfolio and not put all your eggs in one basket.
Investing in established companies with a proven track record can help reduce your risk. These companies have weathered economic downturns and have a history of bouncing back.
They also tend to pay dividends, providing a steady income even when the stock market is down.
4. Improve Your Chances Of Success
New investors often misunderstand that they must time the market ideally to make money. It couldn’t be further from the truth. Remember that you don’t have to hit the home run every time. Even if you make a few bad investments, as long as you have more winners than losers, you’re likely to come out ahead in the end.
Adopting established trading strategies can help improve your chances of success. It has been proven that these strategies work over time. They can help you find suitable investments and avoid costly mistakes.
5. Based On Simple Maths
When investing your money in the stock market, the level of analysis often required to make accurate forecasts can be daunting for new traders.
While the occasional forecast can be helpful, it’s also important to establish a trading strategy based on simple maths and logic. This will allow you to forecast market conditions with a fair degree of accuracy while still maintaining a simple trading strategy. For example, there’s a simple trading strategy called the “moving average crossover.”
This strategy can identify when the stock market is trending upwards or downwards. It can also identify the best times to buy or sell stocks.
6. Strategies Can Be Automated
Trading strategies are often designed to be automated. This means you won’t need to constantly monitor the markets and buy and sell orders.
Instead, you’ll be able to set up an automated trading strategy that allows your money to be traded according to your predetermined rules. As a result, your trading technique can handle the remainder while you concentrate on other areas of your trading business.
Automated trading strategies have become increasingly popular in recent years because most established trading strategies are based on maths and logic, which can be easily automated.
This means you won’t need to constantly monitor the markets, which can be time-consuming and tedious. Instead, you can set up an automated trading strategy that will allow you to sit back and watch your profits grow.
7. Have A Track Record
Trying to go it alone and develop your trading strategy can be tempting when you’re new to investing. Unfortunately, it is often a recipe for disaster. However, trading strategies can be back-tested to see how they would have performed in the past. You may get a sense of how they could perform in the future from it.
Of course, past performance is no guarantee of future results, but it can give you some idea of what to expect. They’re also less likely to experience wild swings in price, which can help you stay calm and focused when the market is volatile.
Established trading strategies have a track record of success that you can examine before deciding to commit your money. This increases your chances of making money in the long run.
8. Give You An Edge Over Other Investors
There are millions of people investing in stocks, and many of them don’t have any idea of what they’re doing. This can give you a significant advantage if you’re armed with the correct information and strategies. In addition, adopting established trading strategies can help give you an edge over other investors.
These strategies can help you find suitable investments, avoid costly mistakes, and make better-informed decisions. This can give you a leg up on the competition and help you achieve your investment goals.
9. Help You Stay Disciplined
It’s important to stay disciplined when investing in stocks. This means sticking to your plan and not letting your emotions affect your decisions. Sadly, it’s too easy to get caught up in the excitement of a rising stock price and forget about your original investment goals. Or, you may get scared out of a position when the market takes a dip.
Established trading strategies can help you stay disciplined. These strategies force you to stick to a plan and resist the urge to make impulsive decisions. In addition, they can help you stay calm and rational when the market is volatile.
10. Test Drive A Strategy Before Committing
When you’re new to investing, it’s natural to want to try out different strategies to see what works best for you. But with so many alternatives available, it may be challenging to know where to begin. That’s why adopting an established trading strategy can be a great way to get started.
Not only will you benefit from following a proven system, but you can also test drive the strategy before committing to it. This way, you’ll have a better idea of whether or not it’s right for you.
There are many different established trading strategies out there to choose from. But no matter which one you choose, ensure you do your homework and understand the risks before putting any money on the line.
11. Offer Flexibility
One of the great things about established trading strategies is their flexibility. There’s no set way to trade, and you can tailor your approach to fit your goals and risk tolerance. You can use them for trading various assets, including stocks, bonds, ETFs, and even cryptocurrencies. This allows you to diversify your portfolio and reduce your risk.
For example, some people prefer to trade frequently, while others only trade once in a while. And some strategies are better suited for long-term investing, while others are more suited for short-term trading. And because they can be adapted to different time frames, you can use them whether you’re a long-term investor or a day trader.
The key is to find a strategy that works for you and that you’re comfortable with. Then, once you’ve found a strategy you like, stick with it, and don’t be tempted to change things up just because the market is going through a rough patch.No matter your goals, there’s an established trading strategy out there that can help you achieve them.
12. Strength In Numbers
When it comes to trading, there’s strength in numbers. That’s why new investors should consider adopting established trading strategies. By following the lead of experienced traders, you can increase your chances of success while minimizing your risk. There are several reasons why established trading strategies are worth considering.
For one, they’ve been tested over time and proven effective. Additionally, they can take the guesswork out of decision-making, which is often one of the most challenging aspects of trading for beginners. Adopting an established trading strategy can be smart if you’re just getting started in the world of investing. It can help you boost your financial goal.
13. Provides Access To Exclusive Information
When you’re just starting, it can be hard to know where to find reliable information about stocks. In addition, you may not have access to the same resources as professional investors.
However, when you adopt established trading strategies, you’ll gain access to exclusive information that can help you make better-informed decisions. This information can give you an edge over other investors who are flying blind. In addition, when you follow an established trading strategy, you can learn from experienced expert investors who have developed and tested it. This can be a significant advantage, especially when you’re just starting.
Following a proven system can avoid many common mistakes new investors make. And you can also benefit from the expertise of other investors who have successfully applied the strategy.
14. You Know What You’re Getting
If you’re new to investing, trying out all the latest trends and strategies can be tempting. But when it comes to trading, it’s generally best to stick with tried-and-true methods. With an established strategy, you know exactly how it works and what to expect regarding results. There’s no guessing or hoping that things will turn out OK – you can have confidence that your trades will go as planned.
15. You Can Focus On Other Things
If you’re constantly worrying about your trades and trying out new strategies, you’ll never be able to focus on the bigger picture. An established trading strategy will free up your time and energy to focus on other essential aspects of your life.
16. You’ll Avoid Costly Mistakes
New investors are often too quick to pull the trigger on a trade without fully understanding the implications. By sticking with an established strategy, you’ll be less likely to make costly mistakes that could set you back financially.
17. Peace Of Mind
One of the enormous benefits of using an established trading strategy is its peace of mind. When you know your trades are in good hands, you can relax and rest easy, knowing that your investment portfolio is in good hands.
For most new investors, the goal is to turn a profit and generate a consistent income. However, it’s important to remember that a slight loss is always better than a significant loss. A significant loss can often lead to a massive capital loss.
Many established trading strategies are designed to mitigate risk. For example, when you’re trading stocks, you’ll often come across what’s known as a “stop-loss order.” This is an order to sell a stock when it reaches a specific price. If the stock price drops below the predetermined price, a “stop-loss” order will be triggered. This will allow you to limit your losses if the stock price continues to fall.
Most established trading strategies have been refined and tested over many years. As a result, they can account for many critical market conditions new investors will face. This is why it’s crucial to implement an established strategy from the beginning of your trading career.
If you’re able to stick to an established trading strategy throughout your entire trading career, you’ll be able to gain valuable experience with the strategy.
You’ll also be able to track your progress over time and learn from your successes and failures. This will help hone your skills and make you a more confident trader.
New investors should adopt established trading strategies, from safeguarding investments to learning valuable trading skills. When it comes to trading and investing, an established strategy is always better than creating your strategy from scratch.
Remember, it’s always easier (and less stressful) to learn from the experiences of others than create your own mistakes.