Having actually been trading stocks and options in the capital markets professionally for many years, I have actually seen numerous ups and downs.
I have actually seen paupers end up being millionaires over night …
And
I have actually seen millionaires become paupers overnight …
One story informed to me by my mentor is still etched in my mind:
“Once, there were two Wall Street stock market multi-millionaires. Both were extremely effective and decided to share their insights with others by selling their stock exchange forecasts in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to understand their views that he spent all of his $20,000 savings to buy both their viewpoints. His pals were naturally delighted about what the two masters needed to state about the stock exchange`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!`.”
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 opinions of future market direction and still earnings. The differences lay in the stock selecting or options technique and in the mental attitude and discipline one uses in executing that strategy.
I share here the basic stock and option trading principles I follow. By holding these concepts firmly in your mind, they will guide you regularly to profitability. These concepts will help you reduce your risk and allow you to evaluate both what you are doing right and what you might be doing wrong.
You might have read concepts similar to these prior to. I and others utilize them due to the fact that they work. And if you remember and reflect on these principles, your mind can use them to direct you in your stock and choices trading.
PRINCIPLE 1.
SIMPLICITY IS MASTERY.
Wendy Kirkland
I picked up this trick from https://www.yahoo.com/video/financial-guru-wendy-kirkland-reveals-071000479.html, When you feel that the stock and options trading technique that you are following is too complicated even for basic understanding, it is most likely not the very best.
In all elements of effective stock and alternatives trading, the most basic techniques often emerge victorious. In the heat of a trade, it is simple for our brains to become emotionally strained. If we have a complex strategy, we can not keep up with the action. Easier is much better.
CONCEPT 2.
NOBODY IS GOAL ENOUGH.
If you feel that you have absolute control over your feelings and can be unbiased in the heat of a stock or options trade, you are either an unsafe types or you are an inexperienced trader.
No trader can be definitely unbiased, specifically when market action is uncommon or hugely irregular. Much like the ideal storm can still shake the nerves of the most seasoned sailors, the best stock exchange storm can still unnerve and sink a trader really rapidly. For that reason, one need to endeavor to automate as many crucial elements of your strategy as possible, especially your profit-taking and stop-loss points.
PRINCIPLE 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important concept.
Many stock and choices traders do the opposite …
They hold on to their losses way too long and view their equity sink and sink and sink, or they leave their gains prematurely only to see the rate go up and up and up. Over time, their gains never cover their losses.
This principle takes some time to master properly. Reflect upon this concept and evaluate your previous stock and options trades. If you have been unrestrained, you will see its fact.
PRINCIPLE 4.
BE AFRAID TO LOSE MONEY.
Are you like most newbies who can`t wait to leap right into the stock and choices market with your cash wishing to trade as soon as possible?
On this point, I have actually discovered that most unprincipled traders are more scared of losing out on “the next huge trade” than they are afraid of losing money! The secret here is STAY WITH YOUR STRATEGY! Take stock and choices trades when your strategy signals to do so and prevent 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 afraid to get rid of your cash because you traded unnecessarily and without following your stock and options strategy.
CONCEPT 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 big winner that you break your own money management guidelines and put in everything you have? Do you remember what normally occurs after that? It isn`t pretty, is it?
No matter how confident you may be when going into a trade, the stock and choices market has a method of doing the unforeseen. For that reason, always adhere to your portfolio management system. Do not compound your awaited wins because you may end up intensifying your very genuine losses.
CONCEPT 6.
ASSESS YOUR PSYCHOLOGICAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You understand by now how different paper trading and real stock and options trading is, do not you?
In the very same way, after you get used to trading genuine money regularly, you discover it extremely different when you increase your capital by ten fold, do not you?
What, then, is the difference? The difference remains in the psychological problem that comes with the possibility of losing increasingly more real cash. This happens when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes.
After a while, many traders realize their maximum capability in both dollars and emotion. Are you comfy trading up to a couple of thousand or 10s of thousands or hundreds of thousands? Know your capacity prior to devoting the funds.
PRINCIPLE 7.
YOU ARE A NEWBIE AT EVERY TRADE.
Ever felt like an expert after a few wins and then lose a lot on the next stock or alternatives trade?
Overconfidence and the incorrect sense of invincibility based on previous wins is a recipe for catastrophe. All specialists respect their next trade and go through all the appropriate actions of their stock or choices strategy prior to entry. Treat every trade as the very first trade you have ever made in your life. Never ever deviate from your stock or alternatives method. Never.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or options strategy only to fail terribly?
You are the one who determines whether a method succeeds or stops working. Your personality and your discipline make or break the strategy that you utilize not vice versa. Like Robert Kiyosaki says, “The financier is the property or the liability, not the investment.”
Understanding yourself initially will lead to 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 catching nothing but the wind.
Stock market changes have more variables than can be mathematically formulated. By following a tested method, we are guaranteed that someone successful has stacked the chances in our favour. When you evaluate both winning and losing trades, determine whether the entry, management, and exit met every criteria in the strategy and whether you have followed it exactly prior to altering anything.
In conclusion …
I hope these easy standards that have led my ship of the harshest of seas and into the very best harvests of my life will guide you too. Best of luck.
