Saturday, September 02, 2006

Tested and true rules of successful trader.

  • Trade for PROFIT, not for material desire

  • Learn to lose

  • Don't trade on tips!

  • If you "cold" - ease up or take a break - Do not "revenge" trade

  • Never turn a trade into investment. ( If trade did not work the way you expected :) )
    Sell if the reason why you opened position is no longer there - keep a journal - when you found candidate, what was the reason for a trade, follow your trade constantly ( According to your trading style ) There is no such thing as "Set it and Forget it"!

  • There are no "PAPER losses" - all paper losses are REAL.

  • There are no "PAPER gains" - all paper gains are NOT REAL

  • Cut losses from trade price at 6-8% - NO exceptions.

  • When in doubt, get out!

  • Do not risk more then %2 of total portfolio value on a single trade.

  • Don't put good money after bad - never average down, only up!

  • Have a good reason to enter the trade - do not trade just because you can.

  • Don't try to catch a "Falling Knife" (don't buy a stock only because it looks cheap )

  • Don't SHORT the stock only because it looks too "expensive" to you.

  • Do not trade more then 7-10 positions (long and short together )

  • Do not fight the tape - most stocks move in the direction of the market. (Would you fight a car driving a bike? - Did not think so...)

  • Sell laggards - it is not enough not to lose money - objective is to MAKE money. ( I sell if within a week price action does not confirm my expectations, if nothing else changed )

  • Let your winners run ( and never give up more the 1/3 of your profits )

  • If profit on the stock more then %8-10, place protective stop to keep at least 2/3 !!!

  • Do homework, find the very BEST candidates and trade SECOND best - what is obvious to you is been obvious to a lot of other people before you.

  • If stock is making new 52wh - and no added volume - don't put your money in it or even start thinking about shorting it

  • Do not chase the stock!