Your stock trading rules are your money. When you follow your rules you make money. However if you break your own stock trading rules the most likely outcome is that you will lose money.
Once you have a reliable set of stock trading rules it is important to keep them in mind. Here is one discipline that can reap rewards. Read these rules before your day starts and also read the rules when your day ends.
Rule 1: I must follow my rules.
Naturally if you develop a group of rules they are going to be followed. It is human instinct to need to change or break rules and it takes discipline to act as agreed by the established rules.
Rule two : I can don’t ever risk more than three percent of my total portfolio on any one stock trade.
There are several old traders. There are lots of bold traders. But there are never any old bold traders. Defending your capital base is basic to successful stock exchange trading over a period of time.
Rule 3: I will cut my losses at 5% to 15% when I am wrong without question.
Some traders have an even lower toleration for loss. The key reason here is to have set points ( stop loss ) in the boundaries of your toleration for loss. Stay informed about the performance of you stock and stick to your stop-loss point.
Rule four : Never set price targets.
This is a style that will allow me to get the most out of rising stocks. Simply let the profits run. Realistically, I can never pick tops. Never feel a stock has risen too high too quickly. Be willing to give back a good percentage of profits in the hope of much bigger profits.The big money is made from trading the really BIG moves that I can occasionally catch.
Rule five : Master one style.
Keep on learning and improving at this one methodology of trading. Never jump from one trading style to another. Master one style instead of become average at implementing a few styles.
Rule 6: Let price and volume be my guides.
Never hear any viewpoint about the exchange or individual stocks you are considering trading or are trading. Everything is mirrored in the price and volume.
Rule seven : Take all valid signals that show up.
Don’t make excuses. If an entry signal shows up you have no excuse not to take it.
Rule 8: Never trade from intra-day data.
There is always share price difference in the course of any trading day. Counting on this info for momentum trading can end up in some wrong calls.
Rule nine : Take time out.
Successful stockmarket trading isn’t only about trading. It is also about emotional strength and physical fitness. Scale back the stress each day by taking time off the computer and working on other areas. A difficult trader won’t make it in the long run.
Rule ten : Be a better than average trader.
So as to succeed in the exchange you do not want to do anything exceptional. You need to not do what the average trader does. The average trader is inconsistent and unruly. Ask each day, “Did I follow my strategy today?” If your answer’s no then you’re in difficulty and it is time to recommit yourself to your stock trading rules.
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