Having been trading stocks and choices in the capital markets professionally throughout the years, I have seen lots of ups and downs.
I have actually seen paupers become millionaires overnight …
And
I have seen millionaires end up being paupers over night …
One story told to me by my mentor is still etched in my mind:
“Once, there were two Wall Street stock exchange multi-millionaires. Both were exceptionally effective and decided to share their insights with others by selling their stock exchange projections in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to know their views that he invested all of his $20,000 savings to buy both their opinions. His buddies were naturally thrilled about what the two masters needed to say about the stock market`s instructions. When they asked their pal, 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 option market, individuals can have various viewpoints of future market direction and still earnings. The differences lay in the stock picking or choices strategy and in the mental attitude and discipline one utilizes in carrying out that method.
I share here the standard stock and alternative trading principles I follow. By holding these principles securely in your mind, they will assist you regularly to success. These principles will help you reduce your threat and enable you to examine both what you are doing right and what you may be doing wrong.
You may have checked out concepts similar to these prior to. I and others use them due to the fact that they work. And if you memorize and assess these principles, your mind can utilize them to assist you in your stock and options trading.
PRINCIPLE 1.
SIMPLICITY IS PROFICIENCY.
Wendy Kirkland
I learned this from Wendy Kirkland, When you feel that the stock and alternatives trading method that you are following is too complex even for basic understanding, it is probably not the very best.
In all elements of successful stock and options trading, the simplest techniques typically emerge triumphant. In the heat of a trade, it is easy for our brains to become mentally overwhelmed. If we have a complex method, we can not stay up to date with the action. Simpler is better.
PRINCIPLE 2.
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 alternatives trade, you are either a dangerous species or you are an inexperienced trader.
No trader can be absolutely objective, especially when market action is unusual or hugely unpredictable. Similar to the best storm can still shake the nerves of the most skilled sailors, the best stock exchange storm can still unnerve and sink a trader really rapidly. For that reason, one need to strive to automate as many crucial elements of your method as possible, especially your profit-taking and stop-loss points.
CONCEPT 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important principle.
Most 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 too soon only to see the cost increase and up and up. Gradually, their gains never ever cover their losses.
This principle requires time to master appropriately. Contemplate this concept and review your previous stock and options trades. If you have been unrestrained, you will see its fact.
CONCEPT 4.
HESITATE TO LOSE CASH.
Are you like a lot of novices who can`t wait to jump right into the stock and options market with your cash hoping to trade as soon as possible?
On this point, I have discovered that a lot of unprincipled traders are more scared of missing out on “the next huge trade” than they are afraid of losing cash! The key here is STAY WITH YOUR METHOD! Take stock and choices trades when your technique 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 afraid to get rid of your cash since you traded needlessly and without following your stock and choices technique.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely believe that your next stock or options 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 typically happens after that? It isn`t quite, is it?
No matter how confident you may be when getting in a trade, the stock and choices market has a way of doing the unexpected. Therefore, always adhere to your portfolio management system. Do not compound your expected wins because you may end up compounding your very real losses.
PRINCIPLE 6.
DETERMINE YOUR EMOTIONAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and real stock and choices trading is, don`t you?
In the very same method, after you get utilized to trading genuine cash consistently, you find it very different when you increase your capital by 10 fold, don`t you?
What, then, is the distinction? The distinction remains in the psychological burden that includes the possibility of losing more and more genuine money. This occurs when you cross from paper trading to real trading and likewise when you increase your capital after some successes.
After a while, the majority of traders recognize their optimal capability in both dollars and feeling. Are you comfortable trading approximately a few thousand or 10s of thousands or hundreds of thousands? Know your capacity 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 incorrect sense of invincibility based on previous wins is a recipe for disaster. All specialists appreciate their next trade and go through all the correct actions of their stock or alternatives technique before entry. Deal with every trade as the very first trade you have actually ever made in your life. Never ever deviate from your stock or alternatives strategy. Never.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or alternatives technique only to stop working badly?
You are the one who identifies whether a method prospers or stops working. Your personality and your discipline make or break the technique that you use not vice versa. Like Robert Kiyosaki states, “The financier is the possession or the liability, not the financial investment.”
Comprehending yourself initially will result in eventual success.
CONCEPT 9.
CONSISTENCY.
Have you ever altered your mind about how to implement a strategy? When you make changes day after day, you end up capturing nothing but the wind.
Stock market fluctuations have more variables than can be mathematically developed. By following a tested method, we are ensured that somebody effective has stacked the chances in our favour. When you review 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 before altering anything.
In conclusion …
I hope these easy standards that have actually led my ship of the harshest of seas and into the best harvests of my life will direct you too. Best of luck.
