4 Tips for Maximizing Trading Returns

Written byWayne Duggan
Published on21 October 2022

Synopsis:


There’s no guaranteed recipe for making big money trading stocks. If there were, every stock trader would be a billionaire in a matter of weeks. However, there are some universal trading tips that can help you minimize your risks and improve your chances of turning consistent profits in the market.


Here are four basic trading tips every investor should understand.



1. Keep things simple.


Even the best NASCAR drivers in the world likely started with a tricycle, a bicycle and a go-cart. They didn’t start out behind the wheel of a 750 horsepower race car driving 200 miles per hour.


Wall Street can be extremely intimidating, particularly when it comes to things like complicated option trades, stock market derivatives and advanced technical analysis. It doesn’t mean you can’t understand and profit from these advanced ideas, but there’s no special prize for coming up with the most complicated trading system. Never make any trade in any asset if you aren’t 100% confident you understand the asset you are trading and the order you are submitting.


When in doubt, just keep things simple. There are plenty of traders who have made a killing with simple, basic stock trading.


2. Test before you invest.


If you have a new trading strategy idea, don’t jump right in with real money before you test it out. There are plenty of trading strategy backtesting applications and services out there ranging from a basic free kit to extremely pricey software. Fortunately, you can test your own strategy in real time in a paper trading or virtual trading account.


Until you test a strategy, you won’t fully know how well it works or what unforeseen problems may arise. When those potential problems pop up, you don’t want it to cost you an arm or a leg because you jumped into a trade without testing. You can even test multiple potential versions of a trading idea to figure out which one works best before you put real money at stake.


3. Start small.


One key element of risk management is being smart with the size of your trade and the margin you use in your account. One catastrophic loss can wipe out weeks or even months of trading profits in the blink of an eye.


Putting too much money into a trade up front may also limit your ability to react and adapt to the market. If you go 100% all in on a trade out of the gate, you may be powerless to hedge the position or potentially add to it and lower your overall cost basis.


4. Don’t chase popular stocks.


There’s a big difference between seeking out volatility in stocks that are trending on social media and scrambling to buy the latest meme stock after it’s already up 30% just because you don’t want to miss out. FOMO, or fear of missing out, is a real phenomenon that can be costly.


Just because a stock like AMC Entertainment (NYSE: AMC) or GameStop (NYSE: GME) is popular on Reddit, Twitter, at church or among your poker buddies doesn’t mean it should be off limits, but it also doesn’t mean you should trade it no matter what. Before you chase a popular stock, ask yourself if you are confident you have a legitimate trading idea or if you are just trading the stock because you don’t want to feel left out of the fun.



Active Trading with Lightspeed


Lightspeed provides professional traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer an optimal user experience. With the intuitive interface layouts and institutional quality stock and options scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.


For more information on a professional trading platform with Lightspeed, please call us at 1-888-577-3123, request a demo, or to open an account.

Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“Content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content are solely based on the user's independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer or recommend any of the services or commentary provided by any of the market commentators/educators or service providers, and any information used to execute any trading strategies are solely based on the independent analysis of the user.


Futures trading involves the substantial risk of loss and is not suitable for all investors.

Each investor must consider whether this is a suitable investment since you may lose all of or more than your initial investment.

Past performance is not indicative of future results.


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Lightspeed Financial Services Group LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“Content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content are solely based on the user's independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer or recommend any of the services or commentary provided by any of the market commentators/educators or service providers, and any information used to execute any trading strategies are solely based on the independent analysis of the user.

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