5 Stock Trading Rules
By Pete T Thomas
Many traders usually place a set of trading rules next to their desk. By doing this it always reminds them to follow their trading plan and will inevitably make them a better trader in the long run.
Whether you are a day trader that trade stocks, Forex trader, swing trader or any other type, these set of trading rules applies to just about all and will help you become a successful.
#1. Prepare for The Trading Day All successful traders plan for their day and they will tell you that the planning that they have done before the day is specifically linked with their trading success.
Preparing for the day involves a range of things, such as: being psychologically ready, making sure your platform is up and ready to go and doing your research. You need to find a list of stocks that have the possibility of meeting your trading system requirements. Once you have found some stocks that meet your criteria, put them on your watch list.
#2. Concentrate on Capital Conservation & Risk Management One of the most essential day trading rules is capital preservation and risk management. Both go hand-in-hand, if you don't have the appropriate risk management then you won't be able to conserve your capital.
This should be your first priority before trying to make money. Without the proper risk management and safe guarding your capital, you can end up losing a large sums of capital and be out of business as a trader. Once you have perfected this, then profits will take care of on its own.
In trading, you have great trades and poor trades, and ideally, through a steady process, you make money overall. Trading is not about attempting to hit "home runs" by taking substantial risk on any one trade.
You can't control the markets but you can control your capital and your risk on each and every trade that you put on. You can protect capital by the amount of capital you put into a single position and limiting losses by having stop-losses in place.
#3. Never Be Emotional Traders might deal with various emotions from the joy or excitement of making a great trade, to panic and anxiety of trying to get out of a trade, or maybe despair after losing money, and many other range of feelings.
An important factor to becoming a successful trader is if you control your emotions then you will master the market. In trading you must be rational, not emotional - you must adhere to your trading strategy and rules, and be self-disciplined. Keep in mind, trading is a business and you ought to handle it such as one.
#4. Never over Trade Never over trade merely because you feel like you ought to do something or because you think you need to be making money at all times.
Remember the old expression: "all good things come to those who wait" - clearly in trading this is very true as it is always best to wait for best suited trading opportunity to present itself.
Never force yourself to into a trade, because in the end it will more than likely go against you. Over trading will result in you losing your focus, self-discipline and in the end will almost always cause you to lose money because you won't be focusing your efforts on searching for trades that have better possibility of making you money.
#5. Keep a Trading Journal Whenever you trade a stock, it is recommended to document your trades, feelings and experiences in a trading journal. A trading journal is an excellent instrument for you to rewind and evaluate trades afterwards and examine what worked and what did not. For instance, you can write down your entry and exit spots in a trade, jot down the mistakes you've made, in addition to stuff that you did right in that trade. By making reference to a trading journal, a trader can gain knowledge from their successes and failures, and in the long run it will help to improve you as a trader.