After the recent stock market crash, many traders wondering how to go about trading stocks and options. It is very difficult to see how anyone can trade stocks with confidence after one of the worst slumps in history. So many people have been burned, have lost their savings and retirement accounts or have seen their struggling investment accounts wiped out. Confidence in the market is at an all time low, and traders are rattled. Much of this is psychological; the result of this confidence failure is real.

How can the every day trader restore his confidence in his trading ability?

The first step: Have a trading plan or system. Trading stocks and options is a business, not a hobby. It is definitely not gambling. It involves buying and selling of products, managing risk, and building in diversity. When people get anxious, they start to panic as their portfolio crashes, and the plan goes out the window. Each trader needs to have his own plan, which is based on firm principles, but not so rigid that it cannot be modified.

A good trading plan should have several things built into it. Diversity is critical - you cannot put all your cash eggs into one trading strategy basket. A diversity of risk is important - a mixture of high risk and lower risk strategies is key to having a balanced portfolio. A diversity of strategy is just as important. My trading plan has a mixture of momentum stock trading, high dividend stock and fund trading, credit spread trading, and buying calls and puts.

A Second Issue: The trading plan must include steps to manage risk. A trader's key aim should be to not lose money. Inevitably, there will be ups and downs in any trading system, but the general trend should always be upwards. If a trader can keep the losses to a minimum and the gains respectable, the long terms is always good.

A Third Part of a good plan is simplicity. Complex plans lead to anxiety, and this always ends up in gambling or panic approaches. The more simple a plan is, the easier to understand, the better. In particular, the technical analysis aspects need to be kept simple. Find out for your trading strategy EXACTLY which two or three indicators are important, and stick with those. Don't get distracted by complex models that you don't understand.

Every trading plan can be improved with education. Education in good trading programs that provide skills, not systems, is one of the best investments around.

I have used the recent crash to take a step back and review my trading system, and have used it make improvements. I invested in an exceptional trading course of outstanding value, and you can see why I bought it on my review page right here on hubpages.