How to create the best stock trading system

Stock trading system is a form of your complete trading business plan. You should follow the rules listed there to achieve results you want – making money, generate a wealth or find financial and living freedom.

Such plan using to trade stock markets should be prepared for all different situation you can expect that happen. And as you cannot predict everything in advance, you should review your stock trading business plan regularly.

Starting basics for any market system

The first what you define when you writing a trading plan are the basics and parts you should have in your written document.

How to organize your day to trade stocks

Stock trading is not only about placement of order, entering or exiting of position. There should be also everyday rules for chart analysis, stock market analysis, position management and much more. All these parts should be included in your system you use for making money on the markets.

You can divide your working day to different time parts based on time zone where you live and what market you use for your system. I live in Europe and trade US stock markets mostly so my workday time schedule is different then schedule of a trader living in America.

One part of your time schedule defined in your system should be pre-trading routine . You have to do similar tasks before market is open. Another routine that should be part of stock trading system is needed to recognize stock trading mistakes and correct them

Select proper strategy for your stock trading system

Very important part of a good stock trading system are rules that help to decide what type of strategy is best for today’s stock market situation.

The market situation changes from uptrend to sideways movement and to downtrend. Most of the time market spends in sideways trading, based on a long term statistics. So it is good to have several different strategies in your system. Some for bullish scenario, some for a trading range and some short selling strategies for bear market.

The most common trading strategies used by technically based trades are breakout and pullback trades.

Read more about these and other trading strategies in a special section of this website.

Short sell strategy trade example

How to set up entry, stop-loss and targets for your trades

You need to have these important values prepared for each opportunity you like and that fit with your stock trading system.

You need to define:

I use these two main ways how to setup entry for my trades.

Entering and exiting stock trade

Knowledge of the right order types used to enter or close the position is part of a good system. Read also why I don’t enter stop orders before the exchange is open. I use pre market stock trading hours for my exits from time to time It is important to stick with your risk management rules defined in your system and do not chase the moving share price. It could be crucial for for your online trading and investing results to know when to sell stocks in your portfolio.Prepare list of rules to sell shares.

Swing Trade example

Trade management of your positions

A good trader has to take care of every opened position. You also must regularly monitor price development of any position opened in your portfolio. This should be defined in your system rules too.

The most important tasks of position management for your system are

Low cost trade can be achieved only using proper risk management rules. I recommend to check earnings date for every opportunity you find. Here is description what realtime stock charts I monitor during a day. A very profitable approach in trade management is adding into an already profitable position or re-entry of trade. Prepare a list of rules for all these tasks in advance and follow them in your trading.

Do not forget to study what are major mistakes in swing trading stocks systems to avoid them and shorten your learning.

Write all the answers to the questions listed above on paper to ensure you won’t omit them in the future. These rules are the basics of your stock trading system.