“As soon as, there were two Wall Street stock exchange multi-millionaires. Both were extremely effective and chose to share their insights with others by offering their stock market projections in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to know their views that he invested all of his $20,000 cost savings to buy both their viewpoints. His buddies were naturally thrilled about what the two masters needed to state about the stock market`s direction. When they asked their good friend, he was fuming mad. Baffled, they asked their pal about his anger. He stated, `One stated BULLISH and the other said BEARISH!`.”
The point of this illustration is that it was the trader who was wrong. In today`s stock and option market, people can have different viewpoints of future market instructions and still profit. The distinctions lay in the stock selecting or choices strategy and in the mental attitude and discipline one utilizes in implementing that technique.
I share here the standard stock and option trading principles I follow. By holding these principles firmly in your mind, they will direct you regularly to success. These concepts will assist you decrease your danger and enable you to evaluate both what you are doing right and what you may be doing wrong.
You might have checked out ideas similar to these prior to. I and others utilize them due to the fact that they work. And if you memorize and reflect on these concepts, your mind can utilize them to assist you in your stock and alternatives trading.
CONCEPT 1.
SIMPLICITY IS MASTERY.
I picked this up from Financial Guru Wendy Kirkland Reveals Smart Paycheck, When you feel that the stock and options trading technique that you are following is too complex even for easy understanding, it is probably not the best.
In all aspects of effective stock and options trading, the easiest techniques typically emerge triumphant. In the heat of a trade, it is easy for our brains to become mentally overloaded. If we have a complex technique, we can not keep up with the action. Simpler is much better.
PRINCIPLE 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have absolute control over your emotions and can be unbiased in the heat of a stock or options trade, you are either a harmful types or you are an inexperienced trader.
No trader can be definitely objective, specifically when market action is uncommon or extremely erratic. Just like the ideal storm can still shake the nerves of the most seasoned sailors, the perfect stock exchange storm can still unnerve and sink a trader really quickly. For that reason, one must endeavor to automate as numerous important aspects of your strategy as possible, specifically your profit-taking and stop-loss points.
PRINCIPLE 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most crucial concept.
Many stock and alternatives traders do the opposite …
They hang on to their losses way too long and enjoy their equity sink and sink and sink, or they leave their gains prematurely only to see the price increase and up and up. Gradually, their gains never cover their losses.
This principle takes some time to master effectively. Contemplate this concept and evaluate your past stock and alternatives trades. If you have been undisciplined, you will see its reality.
CONCEPT 4.
BE AFRAID TO LOSE CASH.
Are you like the majority of newbies who can`t wait to jump right into the stock and options market with your cash wishing to trade as soon as possible?
On this point, I have found that most unprincipled traders are more afraid of missing out on “the next big trade” than they hesitate of losing money! The secret here is STICK TO YOUR STRATEGY! Take stock and alternatives trades when your method signals to do so and avoid taking trades when the conditions are not met. Exit trades when your strategy says to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to throw away your money due to the fact that you traded unnecessarily and without following your stock and choices method.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely think that your next stock or choices trade is going to be such a huge winner that you break your own money management rules and put in whatever you have? Do you remember what generally takes place after that? It isn`t quite, is it?
No matter how positive you may be when entering a trade, the stock and choices market has a way of doing the unexpected. For that reason, constantly adhere to your portfolio management system. Do not intensify your anticipated wins due to the fact that you may wind up intensifying your very real losses.
PRINCIPLE 6.
GAUGE YOUR PSYCHOLOGICAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and genuine stock and choices trading is, don`t you?
In the very same method, after you get utilized to trading genuine cash consistently, you discover it extremely different when you increase your capital by ten fold, don`t you?
What, then, is the difference? The distinction is in the emotional burden that includes the possibility of losing increasingly more real money. This takes place when you cross from paper trading to real trading and also when you increase your capital after some successes.
After a while, a lot of traders understand their optimal capability in both dollars and emotion. Are you comfy trading as much as a few thousand or 10s of thousands or hundreds of thousands? Know your capability prior to devoting the funds.
CONCEPT 7.
YOU ARE An AMATEUR AT EVERY TRADE.
Ever seemed like an expert after a couple of wins and then lose a lot on the next stock or choices trade?
Overconfidence and the incorrect sense of invincibility based on past wins is a dish for disaster. All professionals appreciate their next trade and go through all the correct actions of their stock or alternatives technique before entry. Deal with every trade as the first trade you have actually ever made in your life. Never ever differ your stock or choices method. Never ever.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices method only to fail terribly?
You are the one who figures out whether a technique succeeds or fails. Your character and your discipline make or break the technique that you utilize not vice versa. Like Robert Kiyosaki states, “The investor is the property or the liability, not the financial investment.”
Understanding yourself first will cause eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to execute a strategy? When you make changes day after day, you wind up capturing nothing but the wind.
Stock market variations have more variables than can be mathematically developed. By following a tested strategy, we are assured that someone effective has actually stacked the odds in our favour. When you review both winning and losing trades, identify whether the entry, management, and exit fulfilled every criteria in the strategy and whether you have followed it precisely before changing anything.
In conclusion …
I hope these simple guidelines that have actually led my ship of the harshest of seas and into the very best harvests of my life will guide you too. Good Luck.