The life of a trader has been glorified with social media such as TikTok, but with a proper strategy, the life you see on the internet is possible. In the past we have discussed a trading strategy that involved profiting from low capital options that didn’t need a big move between strike prices. That article will be attached below. This strategy however has a different target, it only concerns with the percentage gain of the position, and it is a prime example of a disciplined trading strategy.
This is a different kind of article, it will not be calling on facts or recent market news or creating predictions. It’s purpose is to open your vision to a confident way to strive to grow wealth in the markets, and is very good for young traders.
What is the Strategy?
The strategy calls for taking profits at a strict 7% gain. Once you reach 7% in profits, whether it is 5 minutes or 5 hours, you exit your position.
Ideally this strategy is for day traders, however swing traders can use it as well. This strategy helps those who are a little too optimistic, like myself, and always ponder if more could be gained. Sometimes this leads to more green, or a drawback in profits. 7% doesn’t seem like much profit, but it depends on the scale, and how often you make 7% which is the main part of the strategy.
Beautiful Compounding
If you make 7% every day, 7% will begin to feel like a lot very soon. In a $1,000 account, 7% the first day would be $70. The next day, 7% would become $1,144.90. After 5 days of this method, you make a little over $400. It may not seem like much, but if you stick with this disciplined trading strategy, the return will be exponential, literally.
Ideally this method would be done by trading options, similar to the first strategy we discussed. Options trading gives you the easiest opportunity to see 7% on a daily matter. Although, with precise day trading of equities, this 7% mark is also quite possible. The point is to not be diminished by small gains at first, and trust the process, until 7% is more than your original starting point!
Drawbacks
This kind of strategy doesn’t favor smaller accounts. The growth will be the same with a strict 7%, but it doesn’t account for slippage. With small option buys, there are small costs like commissions that can actually heavily affect percent gains. If you are on a platform like Robinhood, which has no commissions, you can avoid this luckily.
Also, this strategy becomes much tougher if you cannot day trade. If you are up 7% the same day but you cannot day trade, you have to wait and hope you don’t lose your gains the next day. If you factor this ideology into your trade, it can be avoided, but can be annoying at times. However, it could gain you more profit, if you’re trade continues to work in your favor the next day.
Obviously, the largest drawback is that it is very unlikely you will be right everyday. Trades can’t always be right, meaning sometimes you will return negative. This is okay, as long as you nip your losses quickly. A solid number to take losses at would probably be between -5% to -10%. If you are confident in your moves, your number of wins will outweigh your losses.
Final Thoughts
If you find yourself to be undisciplined when trading, this strategy could be perfect for you. There are other strategies out there that could work better for you, but no strategy is never the way to go. Find what works best for you!
The Common Trader 