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Stock Market Trading: The 20 Rules of Engagement

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"Good traders know how to make money; great traders know how to take a loss," and 19 other truisms to trade by.

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11. Maximize reward relative to your risk.

If you identify the right entry through the lens of time and price, you will create an advantageous risk/reward. It is rarely smart to slap on an entire position at one price level; scaling into risk is often smart, particularly if you're new to a stock and unfamiliar with how it trades.

12. Perception is reality in the marketplace.

When it comes to the process of price discovery, it's not "what is" that matters; it's "what's perceived to be" that dictates the supply and demand in the marketplace. Identifying the prevalent psychology is extremely helpful in determining whether to ride the wave of momentum or take the other side of conventional wisdom.

For more professional trading and investing tips, check out Minyanville's new MV Education Center.
No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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