Your stock trading rules are your money. When you pursue your rules, you make a profit. Nevertheless, if you float your stock trading rules, the presumable outcome is that you will lose money.
Once you have a dependable set of stock trading rules, it is essential to keep them in mind. Here is one discipline that can reap the rewards. Examine these rules earlier than your day starts, and also read the rules when your day ends.
Rule 1: I must follow my rules.
Unsurprisingly, if you build up a set of rules, they are to be followed. It is human character to want to vary or break the restraint to keep on acting in agreement with the established laws.
Rule 2: I won’t risk more than 3.5% of my total portfolio on any one stock trade.
There are many old traders. There are many bold traders. But there are never any aggressive old traders. Defending your capital base is primary to doing well in stock market trading over time.
Rule 3: Never set price targets.
This is a method that will permit me to get the most out of growing stock. Basically, let the profits run. Pragmatically, I won’t pick tops. Never believe a stock has risen too high too rapidly. Be ready to give back a good percentage of profits in the hope of much bigger profits.
Huge money is made from trading the really BIG moves that I can occasionally catch.
Rule 4: I will cut my losses at 5.5% to 15.5% when I am wrong without question.
Some traders have even lower patience for loss. The critical point here is to have set points (stop loss) within the limits of your tolerance for loss. Stay informed about the performance of your stock and stick to your stop-loss point.
Rule 5: Master one style.
Keep learning and getting improved at this one process of trading. Never jump from one trading approach to another. Master one approach rather than become average at implementing several approaches.
Rule 6: Let price and volume be your guides.
Don’t pay attention to any view concerning the stock market or individual stocks you are bearing in mind trading or are already trading. The whole thing is considered in the price and quantity.
Rule 7: Take all convincing signals that show up.
Don’t create excuses. If an opening signal shows up, you have no explanation not to take it.
Rule 8: Never trade from intra-day data. There is always stock price variation within any trading day. Relying on this data for impetus trading can lead to some erroneous decisions.
Rule 9: Be an over the average trader.
To make it in the stock market, you don’t need to do anything extraordinary. It would help if you simply did not do what the average trader does. The average trader is inconsistent and undisciplined. Ask yourself every day, “Did I follow my method today?” If your response is negative, then you are in trouble, and it’s time to recommit yourself to your stock trading rules.
Rule 10: Take time out.
Triumphant stock trading isn’t exclusively about trading. It’s also about emotional vigor and material fitness. Narrow down the pressure every day by taking time off the computer and working on other aspects. A nerve-racking trader will not make it in the long term.