Having actually been trading stocks and options in the capital markets expertly for many years, I have actually seen lots of ups and downs.
I have seen paupers become millionaires overnight …
And
I have actually seen millionaires become paupers over night …
One story told to me by my mentor is still etched in my mind:
“When, there were two Wall Street stock exchange multi-millionaires. Both were incredibly successful and chose to share their insights with others by selling their stock exchange projections in newsletters. Each charged US$ 10,000 for their viewpoints. One trader was so curious to understand their views that he spent all of his $20,000 savings to purchase both their viewpoints. His good friends were naturally thrilled about what the two masters had to state about the stock market`s direction. When they asked their good friend, he was fuming mad. Baffled, they asked their pal 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, people can have different opinions of future market instructions and still revenue. The differences lay in the stock picking or alternatives strategy and in the mental attitude and discipline one utilizes in executing that method.
I share here the basic stock and option trading concepts I follow. By holding these concepts firmly in your mind, they will guide you consistently to success. These concepts will assist you reduce your risk and enable you to evaluate both what you are doing right and what you might be doing wrong.
You may have checked out concepts similar to these prior to. I and others use them since they work. And if you memorize and reflect on these principles, your mind can use them to guide you in your stock and alternatives trading.
CONCEPT 1.
SIMPLENESS IS PROFICIENCY.
I picked up this trick from -, When you feel that the stock and options trading method that you are following is too complicated even for basic understanding, it is probably not the best.
In all elements of successful stock and choices trading, the simplest methods frequently emerge triumphant. In the heat of a trade, it is simple for our brains to end up being emotionally overloaded. If we have a complex method, we can not stay up to date with the action. Simpler is much better.
PRINCIPLE 2.
NO ONE IS OBJECTIVE ENOUGH.
If you feel that you have outright control over your emotions and can be objective in the heat of a stock or alternatives trade, you are either a harmful types or you are an unskilled trader.
No trader can be absolutely objective, especially when market action is unusual or hugely erratic. Much like the ideal storm can still shake the nerves of the most skilled sailors, the ideal stock market storm can still unnerve and sink a trader very quickly. For that reason, one must venture to automate as many crucial elements of your method as possible, particularly your profit-taking and stop-loss points.
PRINCIPLE 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most essential principle.
Many 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 get out of their gains prematurely just to see the cost increase and up and up. In time, their gains never cover their losses.
This concept takes some time to master appropriately. Reflect upon this concept and examine your previous stock and options trades. If you have been undisciplined, you will see its truth.
CONCEPT 4.
HESITATE TO LOSE MONEY.
Are you like most beginners who can`t wait to leap right into the stock and choices market with your cash intending to trade as soon as possible?
On this point, I have found that a lot of unprincipled traders are more afraid of missing out on “the next huge trade” than they hesitate of losing money! The secret here is ADHERE TO YOUR METHOD! Take stock and choices trades when your strategy signals to do so and prevent taking trades when the conditions are not satisfied. Exit trades when your method says 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 choices technique.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely believe 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 happens after that? It isn`t quite, is it?
No matter how positive you might be when entering a trade, the stock and choices market has a method of doing the unexpected. Therefore, constantly adhere to your portfolio management system. Do not compound your awaited wins since you may wind up compounding your very genuine losses.
CONCEPT 6.
GAUGE YOUR EMOTIONAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You know by now how various paper trading and real stock and options trading is, don`t you?
In the very same method, after you get utilized to trading real money regularly, you find it incredibly different when you increase your capital by ten fold, don`t you?
What, then, is the distinction? The difference is in the psychological problem that includes 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 realize their maximum capability in both dollars and feeling. Are you comfortable trading up to a couple of thousand or 10s of thousands or hundreds of thousands? Know your capacity before devoting the funds.
PRINCIPLE 7.
YOU ARE A NEWBIE 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 past wins is a recipe for disaster. All specialists respect their next trade and go through all the proper steps of their stock or choices method before entry. Treat every trade as the very first trade you have actually ever made in your life. Never ever differ your stock or choices method. Never ever.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices method just to stop working badly?
You are the one who determines whether a strategy prospers or fails. Your character and your discipline make or break the strategy that you utilize not vice versa. Like Robert Kiyosaki states, “The financier is the possession or the liability, not the investment.”
Comprehending yourself first will result in ultimate success.
CONCEPT 9.
CONSISTENCY.
Have you ever changed your mind about how to execute a strategy? When you make changes day after day, you wind up capturing nothing but the wind.
Stock market changes have more variables than can be mathematically formulated. By following a tested strategy, we are ensured that somebody effective has actually stacked the chances in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit fulfilled every criteria in the technique and whether you have actually followed it specifically prior to changing anything.
In conclusion …
I hope these basic standards that have led my ship of the harshest of seas and into the best harvests of my life will guide you too. Best of luck.