- Follow the rule of three.
- Keep losses small.
- Adjust stops and targets at the end of the day.
- Keep commission low.
- Amateurs at the open, pros at the closes.
- Know the general market trends, and trade accordingly. There are five general types of market trends: strong and weak uptrend, strong and weak downtrend, and range-bound.
- Write down every trade.
- Never average down on losing position.
- Never overtrade.
- Give at least 10 percent of all trading earnings to charity.
Do not enter any trade unless there are three of technical indicators telling the same. Three is the minimum, and more is better.
It is important to keep losses to a minimum, as most large losses started out as small ones, and large losses can end your trading permanently. Keep the small losses by setting stop losses on all open trades.
Why pay a premium for a brand name? Remember, commission are part of your overhead cost.
If you must trade in the morning, be sure to ease into your trades in smaller portions. You might miss out on some nice moves, but in long run you will save your money. Even better, look to enter your trades within the last two hours of trading.
In weak uptrends and downtrends, you should focus on continuation plays; in strong uptrends and downtrends, you should focus on breakout plays; and in range-bound, you should look for reversal setups.
Analyze them at the end of each month. Are you consistently losing with one particular setup? Are your breakout plays working better than your reversal plays? Are your stop losses set to tight? Use this journal to learn about your weakness as a trader.
Let's say you buy a stock, expecting it to take off like a rocket, and instead it drops like a rock. What do you do? Answer: you do nothing. You stick your plan. You keep your stop loss in place, and wait patiently. Do not buy more shares at a lower price to make your average cost lower. That is a loser's game. You already own shares at that price, why buy more? Why throw good money after bad? Just sit on your hands and let the market do what it wants.
