Having actually been trading stocks and options in the capital markets expertly for many years,I have seen numerous ups and downs.
I have seen paupers end up being millionaires over night …
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 two Wall Street stock market multi-millionaires. Both were exceptionally successful and chose to share their insights with others by offering their stock market forecasts in newsletters. Each charged US$ 10,000 for their viewpoints. One trader was so curious to know their views that he invested all of his $20,000 cost savings to purchase both their viewpoints. His pals were naturally thrilled about what the two masters needed to state about the stock market’s direction. He was fuming mad when they asked their friend. Baffled,they asked their friend about his anger. He stated,’One stated BULLISH and the other stated BEARISH!'”. Smart Paycheck
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 earnings. The differences lay in the stock selecting or options strategy and in the mental attitude and discipline one utilizes in carrying out that strategy.
I share here the standard stock and option trading principles I follow. By holding these principles securely in your mind,they will guide you regularly to profitability. These principles will assist you decrease your danger and enable you to evaluate both what you are doing right and what you may be doing wrong.
You may have read ideas comparable to these prior to. I and others utilize them because they work. And if you remember and show on these principles,your mind can utilize them to guide you in your stock and options trading.
SIMPLICITY IS MASTERY.
When you feel that the stock and options trading method that you are following is too complicated even for simple understanding,it is most likely not the very best.
In all elements of successful stock and options trading,the easiest approaches often emerge victorious. In the heat of a trade,it is simple for our brains to end up being emotionally overloaded. If we have a complex strategy,we can not keep up with the action. Easier is better.
NOBODY IS GOAL ENOUGH.
If you feel that you have outright control over your feelings and can be unbiased in the heat of a stock or options trade,you are either a hazardous species or you are an unskilled trader.
No trader can be absolutely unbiased,especially when market action is hugely unpredictable or uncommon. Similar to the ideal storm can still shake the nerves of the most seasoned sailors,the ideal stock market storm can still unnerve and sink a trader very rapidly. One should endeavor to automate as numerous vital elements of your strategy as possible,especially your profit-taking and stop-loss points.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most essential concept.
Most stock and options traders do the opposite …
They hang on to their losses way too long and enjoy their equity sink and sink and sink,or they leave their gains prematurely just to see the cost go up and up and up. With time,their gains never ever cover their losses.
This concept takes some time to master properly. Contemplate this concept and examine your past stock and options trades. If you have been undisciplined,you will see its truth.
BE AFRAID TO LOSE CASH.
Are you like most newbies who can’t wait to jump right into the stock and options market with your cash wishing 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 met. 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 scared to discard your cash because you traded needlessly and without following your stock and options strategy.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely think that your next stock or options trade is going to be such a big winner that you break your own finance rules and put in whatever you have? Do you remember what usually takes place 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 way of doing the unforeseen. Constantly stick to your portfolio management system. Since you may end up intensifying your very real losses,do not compound your expected wins.
DETERMINE YOUR PSYCHOLOGICAL CAPACITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how different paper trading and real stock and options trading is,don’t you?
In the very same method,after you get utilized to trading real cash regularly,you discover it exceptionally different when you increase your capital by ten fold,don’t you?
What,then,is the difference? The difference is in the psychological problem that comes with the possibility of losing a growing number of real cash. When you cross from paper trading to real trading and likewise when you increase your capital after some successes,this takes place.
After a while,most traders realize their optimal capacity in both dollars and feeling. Are you comfy trading as much as a few thousand or 10s of thousands or hundreds of thousands? Know your capacity prior to committing the funds.
YOU ARE A NEWBIE AT EVERY TRADE.
Ever felt like an expert after a few wins and after that lose a lot on the next stock or options trade?
All professionals appreciate their next trade and go through all the proper actions of their stock or options strategy prior to entry. Never deviate from your stock or options strategy.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or options strategy just to fail severely?
You are the one who determines whether a strategy stops working or succeeds. Your personality and your discipline make or break the strategy that you utilize not vice versa. Like Robert Kiyosaki states,”The investor is the liability or the property,not the investment.”.
Understanding yourself initially will result in ultimate success.
Have you ever changed your mind about how to carry out a strategy? You end up capturing absolutely nothing but the wind when you make changes day after day.
Stock exchange variations have more variables than can be mathematically created. By following a proven strategy,we are ensured that somebody successful has stacked the odds in our favour. When you examine both winning and losing trades,determine whether the entry,management,and exit met every requirements in the strategy and whether you have followed it precisely prior to changing anything.
In conclusion …
I hope these simple guidelines that have led my ship out of the harshest of seas and into the very best harvests of my life will guide you too. Good Luck.
Show upon this concept and examine your past stock and options trades. Take stock and options trades when your strategy signals to do so and prevent taking trades when the conditions are not met. Do you absolutely think that your next stock or options trade is going to be such a big winner that you break your own cash management rules and put in whatever you have? No matter how confident you may be when getting in a trade,the stock and options market has a way of doing the unforeseen. All professionals appreciate their next trade and go through all the proper actions of their stock or options strategy prior to entry.