When I played basketball, my coaches always stressed a strong fundamental foundation as the keys to success.

Trading is no different.

So as we begin 2025, let’s put you on the path to trading success.

Here are 8 fundamental strategies to consider when trading the markets.

1. Define Your Goals and Risk Tolerance

First, it’s important to know where you want to go with this.

How much income do you want to generate through trading? Are you looking for short-term gains (e.g. daily or weekly trades) or long-term wealth accumulation?

Then, define your risk tolerance to achieve those goals.

Risk tolerance is the level of risk you’re willing to accept when it comes to making investment decisions. It reflects your emotional and financial capacity to handle losses, which do happen.

Overall, high risk often corresponds with higher potential returns. So make sure your goals are in line with your risk tolerance.

2. Diversify, Diversify, Diversify

Once you know your goals, you can start allocating funds across various asset classes to reduce risk.

Here are a few different areas for a diversified portfolio.

• Equities: Growth potential through individual stocks, ETFs, or indices.
• Fixed Income: Bonds or bond ETFs to provide stability and steady income.
• Commodities: Gold, oil, and other commodities for diversification and inflation hedging.
• Currencies: Forex trading for exposure to global economies.
• Cryptocurrencies: Bitcoin, Ethereum, or other digital assets for high-risk, high-reward opportunities.
• Alternative Investments: Real estate, private equity, or hedge funds (if accessible).

These are all ways to diversify your portfolio. The next step is specific asset allocation.

3. Start With Safe Plays

Consider allocating 50-80% of your portfolio to stable, low-risk investments. These investments include index funds and blue chip stocks.

Once you have capital allocation in safe investments, you can allocate 20-50% for active trading in high-risk assets like options, small-cap stocks, or forex.

4. Be Ready to Adjust

Keep in mind the dynamics of the market can change on a dime.

For example, if we’re in a bull market, then increase your equity exposure in individual stocks, ETFs and indices.

If we’re in a bear market, shift to safe-haven plays like bonds, gold or cash equivalents.

5. Go Global

By diversifying your portfolio geographically, you can better withstand local market downturns and reduce the overall risk of your investments.

Here’s an example of a Geographically Diversified Portfolio.

• 40% U.S. equities (e.g., S&P 500 or Russell 2000)
• 20% Developed international equities (e.g., Europe, Japan)
• 15% Emerging market equities (e.g., China, India, Brazil)
• 15% Global bonds (e.g., sovereign or corporate bonds)
• 10% Real estate (e.g., global REITs)

6. Always Protect Yourself

Risk management is crucial for success in trading. Here are four strategies I stand by.

• Position Sizing: Limit each trade to a specific percentage of the portfolio (e.g., 1–2%).
• Stop-Loss Orders: Protect capital by exiting losing trades early.
• Hedging: Use options or futures to offset potential losses.
• Leverage Control: Avoid over-leveraging, which can amplify losses.

7. Check in Regularly

Over time, your portfolio might drift away from your intended asset allocation.

So make sure to monitor performance metrics at least once a month (e.g., Sharpe ratio, drawdowns) to ensure alignment with goals.

8. Know Your Trading Type

Here are 3 different ways to trade for various risk levels.

• Day Traders: Focus on high-liquidity assets (e.g., large-cap stocks, forex pairs) and maintain a larger allocation to cash for flexibility. Higher risk due to frequent trades. Requires strict discipline.
• Swing Traders: Aim for a balance between equities and commodities, with some allocation to ETFs for medium-term exposure. Positions held for several days to a few weeks. Suitable for those who cannot monitor the market constantly.
• Algorithmic Traders: Test and allocate capital to strategies that align with back-tested results. Relies on mathematical models and automated systems. Risk depends on the complexity and robustness of the algorithm.

One Example of Allocation (Moderate-Risk Trader):

• Equities: 50% (growth-focused stocks or index ETFs).
• Bonds: 20% (government or corporate bonds).
• Commodities: 10% (gold or oil).
• Cash/Cash Equivalents: 10% (for quick opportunities).
• Cryptocurrencies/Alternatives: 10% (high-risk, speculative trades).

YOUR ACTION PLAN

Follow these 8 strategies and you’re well on your way to becoming a successful trader.

These are the exact trading methods Bryan I use in The War Room.

When you join, you’ll receive our own real-time trade alerts every day. You’ll also get in-depth analysis to apply these fundamentals to current market conditions.

Click here to learn more about The War Room.