When to enter and when to exit a trade in the stock market

The most crucial part is knowing when to enter and exit a trade. But before that, you need to understand how the market works.

- What causes Share prices to go up?
Prices go up when shares are being bought. When the stock price hits a certain price, it can continue to go higher because more people are buying

- What causes Share prices to go down
The stock can also reach a price where selling begins. As soon as selling begins, the price starts to go down.

A common mistake is going in when the price is dropping with the belief: what goes down will come up. This is risky because you never know when the price has hit its lowest until later on. A $300 stock can drop to $2. It happens. In general, strong stocks get stronger and weak stocks get weaker. What I usually do is wait for the stock to go up, buy the stock at a high price and sell it at an even higher price. Once the stock starts to pull back, you know it’s time to sell.

Before entering your trades you should already know what price you want to exit. To do this you have to place a stop-loss. This means in the event the trade goes against you, the system will take you out of the trade; this minimizes your loss.

The trick on trading is taking out the emotion from it. There’s no point sitting in front of your computer all night breaking out in cold sweat. Fully automate your trades. Set aside 20 minutes when the market is closed to look for potential trades, calculate your risks (potential loss) and reward (target gains). Look to go in a trade where the potential gain is a lot more that what you can potentially lose.