TRADING TIPS
DEVELOP A PLAN
1. Define specific risk & profit objectives before trading.
> Not having a trading plan results in a lack of money management.
2. Don’t “second guess” the plan even if you incur a loss.
3. Not following a disciplined trading program leads to accepting large losses & small profits.
4. Define offensive & defensive plans when an initial position is taken.
5. Find mentors. (I did - thanks Missy & Mary)
> Don’t ride an ego trip - take advice from successful traders.
6. Trading in inactive markets is dangerous.
7. Don’t overtrade. – Dangerous and stems from lack of planning
8. Do the research on Charts and Company Profiles.
9. Don’t trade against the trend, without reasonable stops.
DIVERSIFY
1. Don’t have a directional bias; for example, always wanting to be long.
2. Don't trade emotionally &/or financially committed to one trade, & NEVER be unwilling to take a loss.
3. Trade based on sound fundamental & technical reasoning.
4. Don’t get a fundamental case & hang onto it, even after the market technically turns.
> Only believe fundamentals as long as the technical signals follow. Both must agree!
5. Don’t base trades on hunches & long shots.
EMOTIONS
1. After several profitable trades, don’t become wild & not conservative.
2. Stay focused on what is proven to work.
3. Trade with your head not your heart.
4. Don’t let adversity or success distorts judgment.
5. Admit to yourself when you have made a mistake.
6. Lack of self-discipline is a major shortcoming.
> This includes impatience, need for action, etc it will create losses.
7. Don’t allow emotions to overcome intelligence when markets are going for you or against you.
PROFIT/LOSS:
1. Timing is VERY IMPORTANT on entering or exiting a stock.
2. Don’t liquidate the good trades & keep the bad ones. 10 DMA as a guide.
3. “Take the small losses & do it quickly." Don’t stick with a loser until it really hurts, then take the loss.
4. Don’t add to a losing position – Include defense points use stops.
5. "Let profits run.” Getting out of a rallying stock too quickly will cause you to miss out on big profits.
6. Taking too big a risk with too little profit potential is a sure road to losses.
GREED:
1. Greed causes profits to dwindle into losses while hoping for larger profits.
2. Don’t try to carry too big of a position with too little capital, or trade too frequently for the size of your account.
3. Don’t try to “beat the market” by day trading on a hunch, nervous scalping, & getting greedy.
> Greed, as evidenced by trying to pick tops or bottoms, is a frequent error. This is really a lack of discipline.
4. Don’t be undercapitalized or trade positions too large, relative to available capital.
> It will cause you to be not flexible enough to change your mind or opinion when the trend is clearly against your positions and not enough capital to survive the shake out.
NEWS
1. Sell on news Buy on rumor.
> Use caution if you jump into a market based on NEWS; the market many times has already discounted the information.
2. Don’t judge markets on the local situation only - take the worldwide situation into account.
3. Don’t make trading decisions based on inside information. It’s illegal, & besides, it’s usually wrong.
Hope this helps you - some of it borrowed - some of it I learned the hard way. ;)
Merci
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