Having been trading stocks and options in the capital markets professionally for many years,I have seen many ups and downs. I have seen paupers end up being millionaires over night … And I have seen millionaires end up being paupers over night … One story informed to me by my mentor is still etched in my mind: ” Once,there were 2 Wall Street stock market multi-millionaires. Both were extremely effective and chose to share their insights with others by selling their stock market forecasts in newsletters. Each charged US$ 10,000 for their viewpoints. One trader was so curious to understand their views that he invested all of his $20,000 savings to buy both their viewpoints. His friends were naturally delighted about what the two masters had to say about the stock market’s instructions. When they asked their buddy,he was fuming mad. Confused,they asked their buddy about his anger.
He said,’One said BULLISH and the other said BEARISH!'”. - is a noteworthy example. The point of this illustration is that it was the trader who was wrong. In today’s stock and alternative market,individuals can have various viewpoints of future market instructions and still profit. The differences lay in the stock picking or options strategy and in the mental attitude and discipline one uses in implementing that strategy. I share here the standard stock and alternative trading concepts I follow. By holding these concepts firmly in your mind,they will guide you consistently to success. These concepts will assist you decrease your threat and enable you to assess both what you are doing right and what you may be doing wrong. You may have read ideas comparable to these before. I and others use them because they work. And if you memorize and assess these concepts,your mind can use them to guide you in your stock and options trading.
PRINCIPLE 1. SIMPLENESS IS MASTERY. When you feel that the stock and options trading method that you are following is too complex even for easy understanding,it is probably not the best. In all elements of effective stock and options trading,the most basic approaches frequently emerge triumphant. In the heat of a trade,it is simple for our brains to end up being emotionally strained. If we have a complex strategy,we can not stay up to date with the action. Simpler is better.
PRINCIPLE 2. NO ONE IS OBJECTIVE ENOUGH. If you feel that you have outright control over your emotions and can be objective in the heat of a stock or options trade,you are either an unsafe species or you are an inexperienced trader. No trader can be definitely objective,specifically when market action is uncommon or wildly erratic. Just like the perfect storm can still shake the nerves of the most skilled sailors,the perfect stock market storm can still unnerve and sink a trader really quickly. One should endeavor to automate as many vital elements 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. The majority of stock and options traders do the opposite … They hold on to their losses way too long and watch their equity sink and sink and sink,or they leave their gains prematurely only to see the cost go up and up and up. Gradually,their gains never cover their losses. This concept takes some time to master appropriately. Contemplate this concept and review your previous stock and options trades. If you have been unrestrained,you will see its reality.
PRINCIPLE 4. BE AFRAID TO LOSE MONEY. Are you like the majority of newbies who can’t wait to leap right into the stock and options market with your cash intending to trade as soon as possible? Take stock and options trades when your strategy signals to do so and prevent taking trades when the conditions are not fulfilled. Exit trades when your strategy says to do so and leave them alone when the exit conditions are not in location. The point here is to be afraid to discard your cash because you traded needlessly and without following your stock and options strategy.
PRINCIPLE 5. YOUR NEXT TRADE COULD BE A LOSING TRADE. Do you definitely believe that your next stock or options trade is going to be such a big winner that you break your own money management rules and put in everything you have? Do you remember what usually occurs after that? It isn’t quite,is it? No matter how confident you may be when getting in a trade,the stock and options market has a method of doing the unexpected. For that reason,always adhere to your portfolio management system. Do not compound your awaited wins because you may end up intensifying your really genuine losses.
PRINCIPLE 6. DETERMINE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY. You understand by now how various paper trading and genuine stock and options trading is,don’t you? In the very same way,after you get used to trading genuine cash consistently,you discover it extremely various when you increase your capital by ten fold,don’t you? What,then,is the distinction? The distinction remains in the emotional burden that includes the possibility of losing increasingly more genuine cash. This occurs when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes. After a while,the majority of traders realize their optimal capability in both dollars and emotion. Are you comfortable trading as much as a few thousand or 10s of thousands or numerous thousands? Know your capability before devoting the funds.
PRINCIPLE 7. YOU ARE A NOVICE AT EVERY TRADE. Ever seemed like a specialist after a few wins and then lose a lot on the next stock or options trade? Overconfidence and the false sense of invincibility based upon previous wins is a recipe for catastrophe. All specialists appreciate their next trade and go through all the proper steps of their stock or options strategy before entry. Treat every trade as the very first trade you have ever made in your life. Never ever deviate from your stock or options strategy. Never ever.
PRINCIPLE 8. YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE. Ever followed an effective stock or options strategy only to fail badly? You are the one who determines whether a strategy is successful or fails. Your character and your discipline make or break the strategy that you use not vice versa. Like Robert Kiyosaki says,”The investor is the property or the liability,not the financial investment.”. Comprehending yourself first will result in eventual success.
PRINCIPLE 9. CONSISTENCY. Have you ever altered your mind about how to implement a strategy? When you make changes day after day,you end up capturing nothing but the wind. Stock exchange fluctuations have more variables than can be mathematically developed. By following a proven strategy,we are ensured that somebody effective has stacked the chances in our favour. When you review both winning and losing trades,determine whether the entry,management,and exit fulfilled every requirements in the strategy and whether you have followed it specifically before altering anything. In conclusion … I hope these easy standards that have led my ship of the harshest of seas and into the best harvests of my life will guide you too. All the best.