Having been trading stocks and alternatives in the capital markets expertly over the years, I have actually seen numerous ups and downs.
I have actually seen paupers become millionaires over night …
And
I have seen millionaires end up being paupers overnight …
One story told to me by my coach is still etched in my mind:
“When, there were two Wall Street stock market multi-millionaires. Both were incredibly successful and decided to share their insights with others by selling their stock market forecasts in newsletters. Each charged US$ 10,000 for their opinions. 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 good friend, he was fuming mad. Confused, they asked their friend about his anger. He stated, `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 various opinions of future market direction and still earnings. The distinctions lay in the stock choosing or options technique and in the mental attitude and discipline one uses in implementing that technique.
I share here the fundamental stock and option trading concepts I follow. By holding these principles strongly in your mind, they will assist you regularly to profitability. These principles will assist you reduce your threat and enable you to evaluate both what you are doing right and what you may be doing wrong.
You might have checked out ideas comparable to these before. I and others use them since they work. And if you remember and assess these concepts, your mind can utilize them to guide you in your stock and choices trading.
PRINCIPLE 1.
SIMPLICITY IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from Books by Wendy Kirkland, When you feel that the stock and alternatives trading method that you are following is too complicated even for simple understanding, it is probably not the best.
In all aspects of successful stock and options trading, the easiest techniques often emerge victorious. In the heat of a trade, it is simple for our brains to end up being emotionally overwhelmed. If we have a complex method, we can not stay up to date with the action. Simpler is much better.
CONCEPT 2.
NO ONE IS OBJECTIVE ENOUGH.
If you feel that you have outright control over your feelings and can be unbiased in the heat of a stock or choices trade, you are either a hazardous types or you are an unskilled trader.
No trader can be definitely unbiased, specifically when market action is unusual or hugely unpredictable. Much like the perfect storm can still shake the nerves of the most experienced sailors, the perfect stock exchange storm can still unnerve and sink a trader really rapidly. For that reason, one must strive to automate as numerous important elements of your method as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most crucial concept.
Most stock and alternatives traders do the opposite …
They hang on to their losses way too long and watch 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. Over time, their gains never ever cover their losses.
This concept takes time to master properly. Contemplate this concept and review your previous stock and alternatives trades. If you have been unrestrained, you will see its truth.
PRINCIPLE 4.
BE AFRAID TO LOSE CASH.
Are you like the majority of beginners who can`t wait to leap 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 many unprincipled traders are more afraid of losing out on “the next big trade” than they are afraid of losing money! The key here is STAY WITH YOUR TECHNIQUE! Take stock and choices trades when your technique signals to do so and prevent taking trades when the conditions are not fulfilled. Exit trades when your technique states to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to get rid of your cash since you traded unnecessarily and without following your stock and alternatives strategy.
PRINCIPLE 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 huge winner that you break your own finance rules and put in everything you have? Do you remember what typically takes place after that? It isn`t pretty, is it?
No matter how positive you may be when going into a trade, the stock and options market has a way of doing the unexpected. For that reason, constantly stick to your portfolio management system. Do not compound your expected wins because you may end up intensifying your really real losses.
CONCEPT 6.
DETERMINE YOUR PSYCHOLOGICAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and genuine stock and choices trading is, don`t you?
In the very same way, after you get utilized to trading real cash consistently, you discover it extremely different when you increase your capital by 10 fold, don`t you?
What, then, is the distinction? The difference remains in the emotional problem that comes with the possibility of losing increasingly more genuine money. This happens when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes.
After a while, a lot of traders recognize their optimal capability in both dollars and feeling. Are you comfortable trading as much as a couple of thousand or 10s of thousands or hundreds of thousands? Know your capability prior to dedicating the funds.
PRINCIPLE 7.
YOU ARE A NEWBIE 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 incorrect sense of invincibility based on past wins is a dish for disaster. All specialists respect their next trade and go through all the correct actions of their stock or choices technique before entry. Deal with every trade as the first trade you have actually ever made in your life. Never differ your stock or choices strategy. Never.
CONCEPT 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or alternatives method only to stop working badly?
You are the one who figures out whether a technique is successful or fails. Your personality and your discipline make or break the method that you use not vice versa. Like Robert Kiyosaki states, “The investor is the asset or the liability, not the financial investment.”
Comprehending yourself first will cause eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed 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 formulated. By following a proven technique, we are assured that someone successful has stacked the odds in our favour. When you examine both winning and losing trades, figure out whether the entry, management, and exit fulfilled every criteria in the method and whether you have actually followed it specifically prior to changing anything.
In conclusion …
I hope these basic standards that have actually led my ship of the harshest of seas and into the very best harvests of my life will direct you too. All the best.