The Trading Rule Book
When it comes to trading you should always have sets of rules. Whether it is about what type of stocks you trade or how you trade them, rules and guidelines will help you maintain the consistency of successfully trading as well as help limit your risk.
The following is a list of rules and guidelines that you should follow to experience the best success with trading stocks.
1. Be open minded
Regardless of how experienced or seasoned you are, everybody can always afford to learn. In the world of trading, there is no right or wrong way just inefficient and efficient ways; however, at the end of the day as long as you are making money that is all that matters.
Be open to any recommendations and comments. It doesn’t hurt to put any stock into your own analysis. What works for one may not work for somebody else.
2. Have fun
Maybe its because we are dealing with money, but many people take stock trading too seriously. Stay loose, take calculated risks every now and then, and don’t be afraid of making trades. If you are just chasing money, then you might not last long.
3. Track
Unless you have an extremely good memory, then there is no way you will be able to remember every trade or stock you have come across.
Track everything. Track entry prices, exit prices, and how you came up with these prices. Keeping a journal of sorts will ultimately help you see your track record and what needs to be fixed.
4. Evolve and adapt
The market is constantly changing, which may require you to tweak your trading method or the stocks you go after. Don’t be afraid to try something or take something away. Just like technology gets outdated, so can certain trading strategies.
5. Discipline
Second guessing yourself will ultimately be the downfall of your trading career. Be confident with your choices and live with the consequences. Don’t sell too early and don’t buy too early. NEVER CHASE A STOCK.
6. Don’t over-analyze
With so many different strategies and analysis tools, ultimately you could take any stock and adjust it to look like a great buying opportunity. Stay consistent with a strategy you are comfortable with and avoid using every ounce of analysis schemes you know.
7. Take profit and deal with losses
The worst thing you can do is hold on to a stock for too long. Take profit whenever you can, and live with it. Rarely will you ever call the exact bottom and top. Something is better than nothing. If you do lose money deal with it and move on.
Lingering and thinking “what if” does you know good because you will never get that trade back.
8. Once the news is out you are too late
Whether you are betting on earnings, speculation, or some type of resistance break, get in early. Most of the time, if the event and hype is already here, then you are too late and already missed the move.
9. Keep things in perspective
Remember what kind of trader you are, how much money you have, and how active you are. What one trader makes is completely irrelevant to what you can make. Odds are if you do not day trade, then you won’t make the same return percentage as somebody that does. In the same manner, they could easily lose way more than you as well.
Remember that many banks don’t even offer more than 2%.