Some of my rules, on a quiet evening:
1) Always know WHY you are entering a trade. Always know why you are exiting a trade. Every single trade.
2) Don't chase. Enter the stock at a level that makes technical sense, knowing beforehand what a technical failure in the stock looks like.
3) Always, always, always, use a stoploss, trailing or otherwise. Never hold a loser. This is dead money. However, also, never use a “physical” stoploss, only a mental stoploss. If market makers want shares, and they can see yours (with Level III), they will come get them. If you can’t trust a stock (because you’ve never traded it before, or because the technical reason for entry is comparatively weak) or watch the stock, and you have to leave your live charts, sell it.
4) Use Chatrooms and Stockboards as WATCH LIST fodder. Use these posts to build your watch lists only. Do not automatically jump in just because you see your favorite guru posting his entry. You are chasing. And, you are not learning if you do this.
5) Learn technical analysis. At a minimum: Learn how to spot resistance and support levels, and learn how to draw trendlines. Also, work on spotting common patterns, cup and handle, head and shoulders, ascending triangles, box formations, Fibonacci levels, etc. These are your tools; a craftsman has to be able to use their tools well.
6) Trust the chart. Have patience. The chart doesn't lie. It can’t. (But also know what your stoploss is).
7) Trade your day in a completely professional manner. Make it serious business. Don't allow sloppiness to enter into your mindset. The marketplace is completely unforgiving, and the sloppy get slaughtered.
8) Keep emotions out of your trades as much as you can. The more closely you can emulate machine-like executions, the more money you will make. Emotions will cost you cash.
9) Never, never, never chase a stock. Up or down. In or out. If you miss your entry, let it go. Another bus is coming soon. If you miss your exit, remain calm. Identify the next support level, and look for a bounce off that. If no bounce comes, exit, calmly, at that support level. Never chase stocks. If you chase, you are trading with emotion. That is a deadly combination.
10) Sell at least half your shares into strength as price approaches a technical area. Lock in profit. However, don’t close a position just because you have made a certain amount of money; sell for technical reasons. You’ll leave less on the table.
11) Be very selective, especially during low volume periods. Practice sitting on your hands.
12) Don't pull money out of a winner, or a fledging position, to chase another stock that might be moving.
13) In general, sell into strength. You can also buy into weakness, but only do so if the overall trend for the stock is up.
14) Especially for OTC, have a target exit in mind, at a point of resistance. Watch closely as the stock approaches. OTC stocks can plummet fast; the use of a simple trendline violation won't always work. Use Level II as a tool for entering and exiting a position only. Don’t watch Level II every single moment (unless you are scalping). Market makers will drive you batty.
15) Never try to "beat" a stock. If you get beat by a stock, move on to another issue, unless there is a solid technical reason for re-entry.
16) Paper trade for at least a few months. No one wants to do this. No me, not anyone. Everybody wants to jump in right after they're flush with their first success. And, bonus, guess what? Paper trading won’t teach you everything you’ll need to know. It’s not even that close to the real deal! But paper trading will help immensely. It’ll save you money.
17) Keep a trading journal. Use it. Always include commissions in the cost of doing business. Note your mistakes. Learn from your mistakes. The market punishes mistakes. You’ll want to learn as quickly as you can.
18) Build redundancy into your trading rig. Multiple connectivity points. Multiple access points to your broker. Multiple computers (in fact, multiples of hardware across the board if you can get it), multiple data sources. Stocks can drop very fast. You don't ever want to be blinded by equipment failure. You can lose money. Use the very best trading rig you can get your hands on. Then duplicate it.
19) Know your datafeed/charting software intimately.
20) If you play news, make sure your news server is fast, and make sure your fills are fast. Otherwise, don’t play news.
21) Keep learning. Never stop.
22) Stay humble. The market will eat your ego for breakfast.
23) Eat right, exorcise. Take breaks during the trading session. Learn to meditate. Then, meditate. This is a high stress business, especially while one is learning.
24) There is a human being behind every post; be nice to people in Chatrooms and Stockboards. They are helping you.
25) If you start to make a consistent profit, don’t forget to pay yourself.
and, finally, The Trend Truly Is Your Friend.
