Having actually been trading stocks and options in the capital markets expertly over the years, I have actually seen lots of ups and downs.
I have actually seen paupers end up being millionaires over night …
And
I have actually seen millionaires end up being paupers over night …
One story told to me by my mentor is still engraved in my mind:
“When, there were two Wall Street stock exchange multi-millionaires. Both were incredibly effective and decided to share their insights with others by offering their stock exchange forecasts in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to know their views that he spent all of his $20,000 savings to purchase both their opinions. His pals were naturally thrilled about what the two masters had to say about the stock exchange`s direction. When they asked their friend, he was fuming mad. Confused, they asked their friend 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 choice market, people can have various opinions of future market instructions and still revenue. The distinctions lay in the stock selecting or options strategy and in the mental attitude and discipline one uses in implementing that method.
I share here the basic stock and option trading concepts I follow. By holding these principles securely in your mind, they will assist you regularly to profitability. These concepts will assist you reduce your danger and permit you to evaluate both what you are doing right and what you might be doing wrong.
You may have read concepts similar to these before. I and others use them since they work. And if you remember and assess these concepts, your mind can use them to assist you in your stock and alternatives trading.
CONCEPT 1.
SIMPLICITY IS PROFICIENCY.
I picked this up from Wendy Kirkland, When you feel that the stock and alternatives trading approach that you are following is too complex even for basic understanding, it is probably not the very best.
In all aspects of effective stock and options trading, the most basic approaches typically emerge victorious. In the heat of a trade, it is simple for our brains to end up being emotionally overwhelmed. If we have a complex strategy, we can not keep up with the action. Simpler is better.
PRINCIPLE 2.
NO ONE IS GOAL ENOUGH.
If you feel that you have outright control over your emotions and can be unbiased in the heat of a stock or options trade, you are either a dangerous types or you are an inexperienced trader.
No trader can be absolutely objective, especially when market action is unusual or extremely irregular. Similar to the ideal storm can still shake the nerves of the most seasoned sailors, the perfect stock exchange storm can still unnerve and sink a trader really quickly. Therefore, one must venture to automate as many vital elements of your technique as possible, especially your profit-taking and stop-loss points.
PRINCIPLE 3.
HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most important 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 price increase and up and up. In time, their gains never ever cover their losses.
This concept requires time to master correctly. Contemplate this principle and examine your past stock and alternatives trades. If you have been undisciplined, you will see its reality.
PRINCIPLE 4.
BE AFRAID TO LOSE MONEY.
Are you like many novices who can`t wait to jump right into the stock and alternatives market with your cash hoping to trade as soon as possible?
On this point, I have actually found that a lot of unprincipled traders are more afraid of losing out on “the next big trade” than they are afraid of losing money! The secret here is STICK TO YOUR METHOD! Take stock and alternatives trades when your strategy signals to do so and prevent taking trades when the conditions are not satisfied. 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 get rid of your money since you traded unnecessarily and without following your stock and alternatives method.
CONCEPT 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you definitely believe that your next stock or choices trade is going to be such a big winner that you break your own money management rules and put in whatever you have? Do you remember what typically occurs after that? It isn`t quite, is it?
No matter how confident you might be when getting in a trade, the stock and options market has a way of doing the unforeseen. For that reason, always adhere to your portfolio management system. Do not compound your anticipated wins since you may end up intensifying your extremely real losses.
PRINCIPLE 6.
EVALUATE YOUR EMOTIONAL CAPABILITY PRIOR TO INCREASING CAPITAL OUTLAY.
You understand by now how various paper trading and real stock and alternatives trading is, don`t you?
In the very same way, after you get used to trading genuine money regularly, you discover it exceptionally various when you increase your capital by 10 fold, don`t you?
What, then, is the difference? The distinction remains in the psychological burden that includes the possibility of losing increasingly more genuine cash. This occurs when you cross from paper trading to genuine trading and likewise when you increase your capital after some successes.
After a while, most traders recognize their maximum capacity in both dollars and emotion. Are you comfy trading up to a couple of thousand or tens of thousands or numerous thousands? Know your capability prior to devoting the funds.
PRINCIPLE 7.
YOU ARE A NOVICE AT EVERY TRADE.
Ever felt like a specialist after a couple of wins and then lose a lot on the next stock or options trade?
Overconfidence and the incorrect sense of invincibility based on previous wins is a recipe for catastrophe. All experts respect their next trade and go through all the appropriate steps of their stock or choices strategy prior to entry. Deal with every trade as the first trade you have actually ever made in your life. Never differ your stock or alternatives technique. Never ever.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed a successful stock or choices technique just to fail severely?
You are the one who identifies whether a method succeeds or fails. Your character and your discipline make or break the strategy that you utilize not vice versa. Like Robert Kiyosaki states, “The investor is the property or the liability, not the financial investment.”
Understanding yourself first will lead to ultimate success.
CONCEPT 9.
CONSISTENCY.
Have you ever altered your mind about how to execute a method? 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 created. By following a tested strategy, we are assured that someone effective has stacked the odds in our favour. When you examine both winning and losing trades, identify whether the entry, management, and exit met every criteria in the strategy and whether you have actually followed it specifically before changing anything.
In conclusion …
I hope these simple standards that have led my ship out of the harshest of seas and into the very best harvests of my life will direct you too. Best of luck.