Did you know that your stock trading rules are your source of money? When you follow your stock trading rules you make money. And whenever you break your own stock trading rules, you tend to lose your hard-earned money. I always do technical analysis in stock trading. This is because of the fact that in short-term trading, the fundamental analysis is not help you much. Nothing can be expected to change the fundamental of a company with a short duration.
Once you have come up with a reliable set of stock trading rules it is very crucial to keep them in your mind or note them down on a note-book. Abiding by those disciplines to follow the preset rules can reap rewards for you. Read these rules before your day starts and also read the rules when your day ends.
For successful stock trading, I must follow my preset rules. Naturally if you develop a set of rules they’re strictly to be followed. It’s human nature to tend to vary or break rules. And it can take discipline to continue to act in compliance with the preset rules.
I’ll never risk more than 3 percent of my total portfolio on any single stock trade. You often come across many matured traders and risk-taking traders in the share market. Your emotion plays a crucial role in succeeding or losing a trade. There are two main emotions that should be properly addressed. They are undoubtedly GREED and FEAR. You should keep a close eye on your emotions. This emotion forces us to make serious mistakes.
When we see two or more consecutive losses in trading, we start doubting the system. When this happens you are at the state of fear; fear of losing more money. You must control your emotion effectively and adhere to proper money management rules. Professional traders seldom throw around their money in stock trading. Protecting your capital base is essential to successful stock market trading with time.
I would cut my losses 5% to 15% when I’m wrong without hesitation. Come whatever may be, I always will adhere to the preset rules that I formulated. Some traders have a much lower tolerance for reduction. The vital point here’s to have set points inside the limits of your tolerance for reduction. Stay informed about the performance of your equity and stick to your stop loss point.
I will never set fixed price targets. This strategy will let me to get the maximum gain from up-trending stocks. Simply allow the profits to run. And when I see the price approaching a major resistance level (technical), I quit from that stock beforehand. Realistically, I can never select an extreme top to exit. Never feel a stock has up too high too quickly. Be willing to give back a good proportion of profits in the hopes of much larger profits. The big money is made from trading the really BIG moves which I can sometimes catch.
Master one style. Always keep learning and more learning from highly recommended books and improvised one technique or strategy that you strictly follow. Limit you learning from books with the proven trading styles. You can also enroll in a good stock trading course. But never jump out of one trading style to another. Master one style as opposed to become average at implementing several styles.
End-of-the-day (EOD) Price levels and Average volume is my guiding factors to enter into a stock. When I see the price of a stock gets pass a long-standing strong resistance level with surging volume, I wait for a convenient level where I can buy that stock. Never listen to expert opinion on the stock market or individual stocks you’re considering trading or are already trading. Everything is shown in the price movement or price chart of a stock.
But never trade based on EOD data only. There’s always stock price variation inside the course of any trading day. Relying upon this information only for momentum trading can lead to some wrong decisions. Always keep the big picture in mind when analyzing a price chart.
Take all valid signals that appear on a price chart. If an entry signal shows up you’ve no excuse not to take it. I oftentimes wait for signals such as RSI (that raises its head up above 30 from below level), 10/30 MA Crossover, MACD, and Parabolic SAR and so on for short-term trading.
Take Time Out. Successful stock trading is not solely about trading. It is largely concerning about emotional strength and shape of a trader. Reduce the stress every day by simply taking time from a computer and working on other areas. A stressful trader won’t do it in the long term. You can lower your stress level by doing physical exercise or yoga along-side with meditation. I always do so to keep me physically and mentally alert. Try to read good books on how to control emotions effectively.
Be an above average trader. To be able to succeed on the stock market you do not have to do anything exceptional. You merely have to be compelled not to do what the common stock traders do. The typical trader is inconsistent and undisciplined. Ask yourself every day, “Did I follow my own method today?” In case your answer is no then you’re in trouble and it is time to recommit yourself to your stock trading rules.
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