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 direction and still profit. The distinctions lay in the stock choosing or alternatives method and in the mental attitude and discipline one utilizes in implementing that technique.
I share here the basic stock and alternative trading principles I follow. By holding these concepts firmly in your mind, they will assist you regularly to profitability. These concepts will help you reduce your danger and allow you to assess both what you are doing right and what you might be doing wrong.
You may have checked out 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 assist you in your stock and options trading.
PRINCIPLE 1.
SIMPLENESS IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from Wendy Kirkland, When you feel that the stock and choices trading technique that you are following is too complex even for easy understanding, it is most likely not the very best.
In all elements of effective stock and alternatives trading, the easiest methods often emerge victorious. In the heat of a trade, it is simple for our brains to become emotionally overwhelmed. If we have a complex strategy, we can not stay up to date with the action. Easier 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 an unsafe types or you are an inexperienced trader.
No trader can be absolutely objective, particularly when market action is uncommon or extremely erratic. Similar to the perfect storm can still shake the nerves of the most seasoned sailors, the best stock market storm can still unnerve and sink a trader very quickly. For that reason, one must venture to automate as numerous vital aspects of your strategy as possible, specifically your profit-taking and stop-loss points.
CONCEPT 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important concept.
Many stock and options 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 too soon only to see the rate go up and up and up. Gradually, their gains never ever cover their losses.
This concept takes some time to master correctly. Reflect upon this principle and evaluate your previous stock and choices trades. If you have been undisciplined, you will see its reality.
CONCEPT 4.
HESITATE TO LOSE MONEY.
Are you like a lot of novices who can`t wait to leap right into the stock and alternatives market with your money wanting to trade as soon as possible?
On this point, I have actually discovered that most unprincipled traders are more scared of missing out on “the next big trade” than they hesitate of losing cash! The key here is ADHERE TO YOUR METHOD! Take stock and options trades when your method signals to do so and avoid taking trades when the conditions are not satisfied. Exit trades when your strategy states 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 cash because you traded unnecessarily and without following your stock and alternatives strategy.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely think that your next stock or alternatives trade is going to be such a huge winner that you break your own money management guidelines and put in whatever you have? Do you remember what normally 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 unforeseen. For that reason, always stick to your portfolio management system. Do not compound your awaited wins because you might wind up compounding your very real losses.
CONCEPT 6.
GAUGE YOUR EMOTIONAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how different paper trading and real stock and alternatives trading is, don`t you?
In the very same way, after you get used to trading real cash consistently, you find it very different when you increase your capital by ten fold, do not you?
What, then, is the difference? The difference remains in the emotional burden that includes the possibility of losing a growing number of real cash. This takes place when you cross from paper trading to real 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 few thousand or 10s of thousands or numerous thousands? Know your capability prior to committing the funds.
PRINCIPLE 7.
YOU ARE A BEGINNER AT EVERY TRADE.
Ever felt like a specialist after a few wins and then lose a lot on the next stock or choices trade?
Overconfidence and the false sense of invincibility based on past wins is a recipe for catastrophe. All specialists appreciate their next trade and go through all the appropriate actions of their stock or alternatives method before entry. Deal with every trade as the very first trade you have ever made in your life. Never deviate from your stock or alternatives technique. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or alternatives technique just to stop working severely?
You are the one who determines whether a strategy succeeds or fails. Your personality and your discipline make or break the technique that you use not vice versa. Like Robert Kiyosaki states, “The investor is the asset or the liability, not the investment.”
Understanding yourself initially will cause eventual success.
CONCEPT 9.
CONSISTENCY.
Have you ever changed your mind about how to implement a technique? 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 created. By following a tested method, we are assured that somebody successful has stacked the odds in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit met every criteria in the technique and whether you have followed it exactly prior to altering anything.
In conclusion …
I hope these easy guidelines that have actually led my ship of the harshest of seas and into the best harvests of my life will guide you too. Good Luck.