What does it take to make consistent profits in the stock market? It takes a strategy, discipline, persistence, being open-minded (market is always right!) and time.
To start with the last: time. It all depends on what type of trading/investor you are. What are you comfortable with? In the sense of: how long are you comfortable with holding a position? Does holding overnight make you uncomfortable? Day trade (hold a position only intra-day). Are your profits too small and your entries and exits not close enough to significant price bottoms and peaks: Swing trade (hold a position for several days to weeks). You don’t mind a few down days or weeks, but rather follow the trend: Trend follow (hold a position for weeks to months, even a year+). Last and least, there’s the buy-hold-and-hope trader. I can’t advice that, as that’s not trading. All other types of trading require skill and application of a large arsenal of trading tools such as price pattern recognition, technical analyses (TA), technical indicators (TIs), Elliot Wave Theory (EWT), etc.
Knowing that, there’s one cardinal rule that comes first and applies to us all regardless of our trading time-frame: WE ARE IN IT TO MAKE A PROFIT. PERIOD. That’s the most important thing you need to remember. We are not doing this to nail the exact bottom or top, we are doing this to make money. Once you remember that, trading becomes easier! Personally, I am as happy with $1 profit, as with $10, $100, $1000. The latter would of course be much nicer, but doesn’t happen all that often. Profit=Profit. Because, it feels so good to make that profit. Nobody can ever take that away from ya! It’s yours to keep forever.
I am a cautious trader and take profits along the way. You can therefore say I am a swing trader. I also only use position sizes that I am comfortable with in the case I lose 5-10% based on my stop-loss level. NEVER use your entire portfolio for 1 position. Diversify! That’s IMHO key to increasing your trading portfolio size.
And don’t try to hit that exact bottom or peak; ’cause you/we can’t (that’s for the big boys). I use OEW, classic TA and TIs to help me guide along the way. Always go for profits, don’t go for the top or bottom. Just be on the right side, and if you can ride 70-80% of an entire move you are doing mighty fine IMHO.
I’ve only been trading since 2010, and much more actively since the 2011 low, I’ve taken a lot of beatings along the way. The first 1 year I was deep in the red, deep. The second year I was neutral and the past years have been profitable. Those beatings (I never paper traded, that’s BS, IMHO… since it won’t hurt ya when you go red; you just re-set and start over… well that’s NOT how the real-world is as you know) taught me some real good lessons. One of them is that there are only 2 types of traders: old traders and bold traders. There are NO old-bold traders. Those with all their stories about 100-1000s % of profits etc are the bold kind, and likely paper traders too for that matter…
When entering a trade the first thing you need to set is your exit level BELOW your purchase price! That’s the most important sell-price. THEN set your target price above the purchase price. Make it reasonable, use EWT, Fibs, TA, TIs, etc and sell at your target. Then sit back, relax, and re-assess. You’ve made a profit, awesome!!!, and there’s always a next bus to catch! Patience = Fortune!!! To that extend, always use stop-losses and/or trailing stops. Profits are guaranteed, and losses are minimized.
There’s a lot more to it IMHO since this is all a mental/analytical game. Hence you have to make sure your brain is well-rested, not strained. So I suggest you eat well, sleep well, be physically fit, be mentally fit –both go hand-in-hand, and read a few books about human psychology. Namely, it helps you understand your emotions and choices better. It will help you take the blame yourself when a trade goes against you. It happens, and it can be tuff to deal with mentally and emotionally. But you know what, cut the loss, and move on to the next trade. Don’t marry yourself to a position or ticker. You only entered it to make money. Nothing else, it’s nothing personal. One can only make it personal. The market has no emotion, neither should you! I say should, because we are emotional creatures.
Now go out there and make so money!!