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.
Once you have a reliable set of stock trading rules it is important to keep them in mind. Here is one discipline that can reap rewards. Read these rules before your day starts and also read the rules 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 risk more than 3% 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 three : I am going to cut my losses at five percent to 15% when I’m wrong without any 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 four : 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 five : Master one style.
Keep learning and getting better at this one method of trading. Never jump from one trading style to another. Master one style rather than become average at implementing several styles.
Rule six : 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 7: Take all valid signals that show up.
Do not make excuses. If an entry signal shows up you have got no excuse to not take it.
Rule eight : Never trade from intra-day information.
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 10: Be an above 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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