Having been trading stocks and options in the capital markets professionally for many years, I have seen many ups and downs.
I have actually seen paupers become millionaires over night …
And
I have actually seen millionaires end up being paupers overnight …
One story informed to me by my coach is still etched in my mind:
“Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful 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 spent all of his $20,000 savings to buy both their opinions. His good friends were naturally delighted about what the two masters needed to state about the stock exchange`s instructions. When they asked their good friend, he was fuming mad. Confused, they asked their good friend about his anger. He said, `One stated BULLISH and the other stated BEARISH!`.”
The point of this illustration is that it was the trader who was wrong. In today`s stock and alternative market, individuals can have different opinions of future market direction and still revenue. The distinctions lay in the stock selecting or options strategy and in the mental attitude and discipline one uses in carrying out that technique.
I share here the fundamental stock and alternative trading principles I follow. By holding these principles securely in your mind, they will guide you consistently to profitability. These concepts will assist you decrease your threat and permit you to examine both what you are doing right and what you might be doing wrong.
You may have read ideas comparable to these prior to. I and others use them because they work. And if you remember and review these concepts, your mind can utilize them to direct you in your stock and options trading.
PRINCIPLE 1.
SIMPLENESS IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from -, When you feel that the stock and options trading approach that you are following is too intricate even for basic understanding, it is most likely not the very best.
In all elements of effective stock and choices trading, the simplest methods frequently emerge victorious. In the heat of a trade, it is easy for our brains to end up being mentally overwhelmed. If we have a complex technique, we can not stay up to date with the action. Easier is better.
CONCEPT 2.
NO ONE IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your feelings and can be objective in the heat of a stock or options trade, you are either a dangerous species or you are an inexperienced trader.
No trader can be definitely objective, specifically when market action is uncommon or wildly irregular. Much like the best storm can still shake the nerves of the most seasoned sailors, the ideal stock exchange storm can still unnerve and sink a trader extremely rapidly. Therefore, one must venture to automate as many crucial elements of your strategy as possible, specifically your profit-taking and stop-loss points.
PRINCIPLE 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important concept.
A lot of stock and options traders do the opposite …
They hold on to their losses way too long and see their equity sink and sink and sink, or they get out of their gains prematurely only to see the price increase and up and up. In time, their gains never ever cover their losses.
This principle takes time to master properly. Reflect upon this concept and review your previous stock and alternatives trades. If you have actually been undisciplined, you will see its fact.
PRINCIPLE 4.
BE AFRAID TO LOSE MONEY.
Are you like a lot of beginners 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 actually found that most unprincipled traders are more scared of missing out on “the next huge trade” than they are afraid of losing money! The key here is STAY WITH YOUR STRATEGY! Take stock and choices trades when your technique signals to do so and prevent taking trades when the conditions are not satisfied. Exit trades when your method says to do so and leave them alone when the exit conditions are not in place.
The point here is to be afraid to discard your money because you traded needlessly and without following your stock and choices technique.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely think that your next stock or options trade is going to be such a huge winner that you break your own money management guidelines and put in everything you have? Do you remember what typically happens after that? It isn`t quite, is it?
No matter how positive you might be when going into a trade, the stock and options market has a method of doing the unforeseen. For that reason, constantly stick to your portfolio management system. Do not intensify your anticipated wins since you might end up compounding your really genuine losses.
CONCEPT 6.
DETERMINE YOUR PSYCHOLOGICAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how different paper trading and genuine stock and options trading is, don`t you?
In the very same method, after you get used to trading real money regularly, you find it incredibly various when you increase your capital by ten fold, do not you?
What, then, is the distinction? The distinction is in the emotional problem that includes the possibility of losing more and more genuine cash. This takes place when you cross from paper trading to genuine trading and also when you increase your capital after some successes.
After a while, many traders recognize their maximum capacity in both dollars and emotion. Are you comfortable trading up to a few thousand or 10s of thousands or numerous thousands? Know your capacity before dedicating the funds.
CONCEPT 7.
YOU ARE An AMATEUR AT EVERY TRADE.
Ever seemed like a professional after a few wins and after that lose a lot on the next stock or options trade?
Overconfidence and the false sense of invincibility based on past wins is a recipe for disaster. All experts appreciate their next trade and go through all the appropriate actions of their stock or alternatives strategy before entry. Treat every trade as the very first trade you have ever made in your life. Never ever differ your stock or alternatives technique. Never ever.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or alternatives method just to fail severely?
You are the one who identifies whether a technique succeeds or stops working. Your character and your discipline make or break the method that you use not vice versa. Like Robert Kiyosaki says, “The investor is the possession or the liability, not the financial investment.”
Understanding yourself initially will result in ultimate success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever altered your mind about how to implement a strategy? When you make changes day after day, you wind up capturing nothing but the wind.
Stock exchange variations have more variables than can be mathematically formulated. By following a tested strategy, we are assured that somebody successful has actually stacked the odds in our favour. When you review both winning and losing trades, determine whether the entry, management, and exit satisfied every requirements in the method and whether you have actually followed it precisely before altering anything.
In conclusion …
I hope these simple guidelines that have led my ship of the harshest of seas and into the very best harvests of my life will assist you too. All the best.