Your securities dealing rules are your cash. When you follow your rules you earn money. However if you break your own securities dealing rules the most probable result is that you are going to lose money.
After you’ve a trustworthy set of stockmarket trading rules it’s critical 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 1: 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. Defending your capital base is basic to successful stock exchange trading over a period of 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 fashion which will let me get the most from rising stocks. Simply let the profits run. Realistically, I’m able to never pick tops. Never feel a stock has risen too high too swiftly. Be ready to give back a good % of profits in the expectation of much larger profits. The serious cash is made of trading the truly Large moves that I’ll infrequently catch.
Rule 5: 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 6: Let price and volume be my guides.
Never hear any viewpoint about the exchange or individual stocks you are considering trading or are trading. Everything is mirrored 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 nine : 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.
So as to succeed in the exchange you do not want to do anything exceptional. You need to not do what the average trader does. The average trader is inconsistent and unruly. Ask each day, “Did I follow my strategy today?” If your answer’s no then you’re in difficulty and it is time to recommit yourself to your stock trading rules.
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