16 Rules to Successful Trading
Trading is a life skill that requires constant improvement.
"As a child I understood how to give, I have forgotten this grace since I have become civilized." --Luther Standing Bear, Oglala Sioux
1. Protect your principal. With commitment.
2. Never use margin. Only trade with 500 to 1000 lots, don't listen to greed that tells you the stock is going to fly up and you need to buy as much a possible -- risking your entire account. This way, you avoid a forced sell (margin call) if the trade goes bad.
3. Avoid big losses. Have no tolerance for loss. Sell when you can, not when you have to. Your first loss is your smallest loss. A small loss is better than a big loss. If you enter a trade and the stock doesn't go the way you predicted, go ahead and take that $50 to $100 loss immediately. Don't sit their like a twit and try to justify a bad trade as you lose more money, dump it. Move on. Forget the need to be right.
4. Trade to trade well. Focus on the trade, not the money. Don't feel pressured by setting monetary goals, just make a good trade. Let the market come to you. Go with the market trend. Pay attention to market news. Identify the trend then execute the trade quickly and calmly. The money will come if you focus on properly identifying entry and exit points.
5. Trade with self-trust. Don't trade on fear. Trade on trust, your abilities, and the technicals you observe. Feelings control actions, but indicators control trades. When you finally evolve to the point that indicators and self-trust guides your trades, emotions of greed, fear, and blame will disappear. Avoid blaming yourself or others, it's too destructive.
6. Develop the ability to change the mind quickly. Admit that you were wrong about a trade and go with the market trend. The market is always right and the price is right. Markets don't care about being fair. The only thing wrong with being wrong is staying wrong.
7. Learn to do nothing. "When in doubt, stay out." Learn to sit on the sidelines. Recognizing and knowing when to trade and when not to trade is the hallmark of a seasoned trader. You can't force a trade to work. Sometimes it's best just to take an afternoon off -- especially when volatility spikes in a sideways market, it's very whippy, or after a bad trade!
8. Pay attention to intuition. Follow your first gut feeling. Learn to listen to this inner guidance and follow that all-knowingness.
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