Your money is based on how you trade stocks. When you stick to your rules, you get paid. But if you break your own rules about trading stocks, you will probably lose money.
Once you have a good set of rules for trading stocks, it's important to remember them. Here is a way to be good that can pay off. Read these rules before you start your day and also before you go to bed.
Rule 1: I have to stick to my own rules.
If you make a set of rules, they should be followed, of course. It's in our nature to want to change or break rules, and it takes discipline to keep doing things the way they're supposed to be done.
Rule 2: I won't risk more than 3% of my entire stock portfolio on any single trade.
There are a lot of old merchants. Many traders are brave. But there are no old traders who are brave. Protecting your capital is a key part of long-term success on the stock market.
Rule 3: When I am sure I am wrong, I will cut my losses at 5 to 15 percent.
Some traders can take even less loss than that. The important thing is to have set points (stop loss) that are within the range of how much loss you can handle. Keep track of how your stock is doing and stick to your stop loss point.
Rule 4: Never set price targets.
This is a way for me to get the most out of stocks that are going up. Just let the money come in. In reality, I can never pick winners. Never think that a stock has gone up too fast and too high. Be willing to give back some of your profits if you want to make much bigger profits.
I make the most money when I trade the really BIG moves that I can sometimes catch.
Rule 5: Master one style.
Learn more about this one way to trade and get better at it. Don't switch from one way to trade to another. Mastering one style is better than getting good at a few styles but not great at any of them.
Rule 6: Let price and volume be my guides.
Never pay attention to what other people say about the stock market or the stocks you want to buy or already own. The price and amount say everything about it.
Rule 7: Pay attention to all valid signs.
Don't give reasons why. You have no reason not to take an entry signal if it appears.
Rule 8: Never trade based on data from the same day. During a trading day, there are always changes in the prices of stocks. If you use this information to trade on momentum, you might make some bad choices.
Rule #9: Take a break.
Trading stocks well isn't just about trading. It is also about being mentally and physically strong. Every day, take some time away from the computer and work on other things. A trader who is stressed out will not do well in the long run.
Rule 10: Be an above average trader.
You don't have to do anything special to make money on the stock market. You just need to avoid making the same mistakes that most traders make. The average trader is erratic and doesn't follow rules. Every day, ask yourself, "Did I follow my plan today?" If you answered "no," you are in trouble and need to stick to your stock trading rules again.
