Having actually been trading stocks and choices in the capital markets professionally throughout the years, I have seen lots of ups and downs.
I have seen paupers become millionaires overnight …
And
I have seen millionaires become paupers over night …
One story informed to me by my mentor is still engraved in my mind:
“Once, there were 2 Wall Street stock market multi-millionaires. Both were extremely effective and decided to share their insights with others by offering their stock exchange projections in newsletters. Each charged US$ 10,000 for their opinions. One trader was so curious to know their views that he invested all of his $20,000 cost savings to buy both their viewpoints. His friends were naturally thrilled about what the two masters had to state about the stock exchange`s instructions. When they asked their good friend, he was fuming mad. Confused, they asked their good friend about his anger. He stated, `One stated 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 alternative market, people can have various viewpoints of future market direction and still profit. The differences lay in the stock picking or alternatives technique and in the mental attitude and discipline one uses in implementing that strategy.
I share here the standard stock and option trading concepts I follow. By holding these principles strongly in your mind, they will direct you consistently to profitability. These concepts will help you reduce your threat and enable you to examine both what you are doing right and what you might be doing wrong.
You may have checked out concepts similar to these before. I and others utilize them since they work. And if you remember and review these principles, your mind can utilize them to direct you in your stock and alternatives trading.
CONCEPT 1.
SIMPLENESS IS PROFICIENCY.
Wendy Kirkland
I picked up this trick from -, When you feel that the stock and alternatives trading technique that you are following is too complex even for basic understanding, it is most likely not the best.
In all aspects of successful stock and alternatives trading, the most basic methods typically emerge triumphant. In the heat of a trade, it is easy for our brains to become mentally overloaded. If we have a complex technique, we can not stay up to date with the action. Easier is better.
CONCEPT 2.
NOBODY IS OBJECTIVE ENOUGH.
If you feel that you have absolute control over your feelings and can be unbiased in the heat of a stock or choices trade, you are either a harmful species or you are an inexperienced trader.
No trader can be absolutely objective, particularly when market action is unusual or extremely unpredictable. Just like the best storm can still shake the nerves of the most experienced sailors, the best stock market storm can still unnerve and sink a trader extremely quickly. Therefore, one should strive to automate as many vital aspects of your method as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3.
HANG ON TO YOUR GAINS AND CUT YOUR LOSSES.
This is the most crucial principle.
The majority of stock and alternatives traders do the opposite …
They hang on to their losses way too long and watch their equity sink and sink and sink, or they leave their gains too soon only to see the rate increase and up and up. With time, their gains never cover their losses.
This principle requires time to master appropriately. Reflect upon this principle and examine your previous stock and alternatives trades. If you have been undisciplined, you will see its fact.
PRINCIPLE 4.
BE AFRAID TO LOSE CASH.
Are you like many beginners who can`t wait to jump right into the stock and options market with your money wishing to trade as soon as possible?
On this point, I have actually discovered that the majority of unprincipled traders are more scared of missing out on “the next huge trade” than they hesitate of losing cash! The secret here is STAY WITH YOUR METHOD! Take stock and alternatives trades when your method signals to do so and avoid taking trades when the conditions are not satisfied. Exit trades when your technique says to do so and leave them alone when the exit conditions are not in place.
The point here is to be scared to throw away your money since you traded needlessly and without following your stock and options strategy.
PRINCIPLE 5.
YOUR NEXT TRADE COULD BE A LOSING TRADE.
Do you absolutely think that your next stock or choices trade is going to be such a huge winner that you break your own money management rules and put in whatever you have? Do you remember what generally takes place after that? It isn`t pretty, is it?
No matter how positive you might be when entering a trade, the stock and alternatives market has a method of doing the unforeseen. For that reason, constantly stay with your portfolio management system. Do not compound your awaited wins due to the fact that you may end up intensifying your really genuine losses.
CONCEPT 6.
EVALUATE YOUR PSYCHOLOGICAL CAPABILITY BEFORE INCREASING CAPITAL OUTLAY.
You understand by now how various paper trading and real stock and options trading is, do not you?
In the very same method, after you get utilized to trading genuine cash regularly, you find it exceptionally different when you increase your capital by 10 fold, do not you?
What, then, is the distinction? The difference remains in the emotional burden that includes the possibility of losing more and more genuine cash. This takes place when you cross from paper trading to real trading and likewise when you increase your capital after some successes.
After a while, most traders recognize their optimal capability in both dollars and emotion. Are you comfortable trading approximately a couple of thousand or 10s of thousands or numerous thousands? Know your capability prior to committing the funds.
CONCEPT 7.
YOU ARE A NEWBIE AT EVERY TRADE.
Ever felt like a professional after a few 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 professionals appreciate their next trade and go through all the correct actions of their stock or options technique before entry. Treat every trade as the very first trade you have actually ever made in your life. Never deviate from your stock or options method. Never ever.
PRINCIPLE 8.
YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE.
Ever followed an effective stock or choices method just to fail severely?
You are the one who identifies whether a method prospers or stops working. Your character and your discipline make or break the method that you use not vice versa. Like Robert Kiyosaki states, “The investor is the asset or the liability, not the investment.”
Understanding yourself initially will lead to eventual success.
PRINCIPLE 9.
CONSISTENCY.
Have you ever changed your mind about how to carry out a technique? When you make changes day after day, you wind up catching nothing but the wind.
Stock market fluctuations have more variables than can be mathematically created. By following a tested technique, we are guaranteed that someone successful has stacked the odds in our favour. When you examine both winning and losing trades, determine whether the entry, management, and exit satisfied every criteria in the method and whether you have actually followed it exactly prior to altering anything.
In conclusion …
I hope these easy standards that have actually led my ship of the harshest of seas and into the best harvests of my life will direct you too. All the best.