Your stock dealing rules are your cash. When you follow your rules you make money. However if you break your own securities trading rules the likeliest outcome is that you’ll lose money.
When you’ve a trustworthy set of securities dealing rules it’s really important to keep them under consideration. Here is one discipline that will harvest rewards. Read these rules before your day starts and also read the guidelines when your day ends.
Rule one : I must follow my rules.
Naturally if you develop a set of rules they are to be followed. It is human nature to want to vary or break rules and it takes discipline to continue to act in accordance with the established rules.
Rule two : I can don’t ever risk more than three percent of my total portfolio on any one stock trade.
There are several old traders.There are lots of bold traders. But there are never any old bold traders. Shielding your capital base is basic to successful stock exchange trading over time.
Rule 3: I will cut my losses at 5% to 15% when I am wrong without question.
Some traders have an even lower toleration for loss. The key point here is to have set points ( stop loss ) in the boundaries of your toleration for loss. Stay informed about the performance of you stock and stick to your stop-loss point.
Rule 4: Never set price targets.
This is a style that will allow me to get the most out of rising stocks. Simply let the profits run. Realistically, I can never pick tops. Never feel a stock has risen too high too quickly. Be willing to give back a good percentage of profits in the hope of much bigger profits.The big money is made from trading the really BIG moves that I can occasionally catch.
Rule 5: Master one style.
Keep on learning and improving at this one methodology of trading. Never jump from one trading style to another. Master one style instead of become average at implementing a few styles.
Rule 6: Let price and volume be my guides.
Never listen to any opinion about the stock market or individual stocks you are considering trading or are already trading. Everything is reflected in the price and volume.
Rule seven : Take all valid signals that show up.
Don’t make excuses. If an entry signal shows up you have no excuse not to take it.
Rule eight : Never trade from intra-day info.
There is always share price difference in the course of any trading day. Counting on this info for momentum trading can end up in some wrong calls.
Rule 9: Take time out.
Successful stock trading isn’t solely about trading. It’s also about emotional strength and physical fitness. Reduce the stress every day by taking time off the computer and working on other areas. A stressful trader will not make it in the long term.
Rule ten : Be a better than average trader.
In order to succeed in the stock market you don’t need to do anything exceptional. You simply need to not do what the average trader does. The average trader is inconsistent and undisciplined. Ask yourself every day, “Did I follow my method today?” If your answer is no then you are in trouble and it’s time to recommit yourself to your stock trading rules.
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