Rules aren't meant to be broken when it comes to trading penny stocks. Your rules are the key to your success and the road to profit. Break the rules and you'll break the bank.
Once you have a reliable set of stock trading rules it is important to keep them in mind. Here is one discipline that can reap rewards. Read these rules before your day starts and also read the rules when your day ends.
Rule 1: I will always be obedient to my rules
You might not thing this need to be said, but it does. The number one reason people fail at trading is that they break their rules when they think something is a sure thing. It's just human nature. But you have to learn to ignore this impulse.
Rule 2: At no time will I ever risk more than 3% of my total portfolio on a an individual trade.
The most important part of your trading 'business' is your capital. You can't afford to risk it all on one trade because you will have losses and you have to have the resources to ride out fluctuations.
Rule 3: I will cut my losses at 5% to 15% when I am wrong without question.
You are going to make losses. It's the nature of the game. But when you do you must be willing to set a point at which you will stop further sliding. Don't go beyond this point. It's must be a rule.
Rule 4: Never set price targets.
You want to make the most out of rising stock prices. Let it ride when the price is going up. It's impossible to pick the top anyway. And sometimes a stock does rise extremely fast. In some cases you're stock will settle and start coming back to earth. Sell then. In the meantime let it go as high as it wants to go.
The big money is made from trading the really BIG moves that I can occasionally catch.
Rule 5: Make one style your own.
Keep learning and getting better at this one method of trading. Never jump from one trading style to another. Master one style rather than become average at implementing several styles.
Rule 6: Make volume and price your guide.
It's almost impossible not to hear gossip, rumor and innuendo regarding stocks. Don't listen to it. Stay focused on price and volume ONLY and close yourself off to other opinions about stocks you are considering or actively trading.
Rule 7: Never ignore signals.
Don't make excuses. If an entry signal shows up you have no excuse not to take it.
Rule 8: Ignore intra-day data. Every trading day includes variations in stock prices. If you rely on intra-day data and momentum trading you'll make mistakes.
Rule 9: Take breaks.
Successful stock trading isn't solely about trading. It's also about emotional strength and physical fitness. Reduce the stress every day by taking time off the computer and working on other areas. A stressful trader will not make it in the long term.
Rule 10: Be a trader above the average.
To be successful in the trading business the key is to simply stay above the average. Stay consistent, focused and disciplined. Remind yourself of your rules regularly and if you start to feel you are straying to any extent force yourself back into line. This is the key to your success. Submit yourself to as tough a scrutiny as you put your trades and you'll be better than most.
Once you have a reliable set of stock trading rules it is important to keep them in mind. Here is one discipline that can reap rewards. Read these rules before your day starts and also read the rules when your day ends.
Rule 1: I will always be obedient to my rules
You might not thing this need to be said, but it does. The number one reason people fail at trading is that they break their rules when they think something is a sure thing. It's just human nature. But you have to learn to ignore this impulse.
Rule 2: At no time will I ever risk more than 3% of my total portfolio on a an individual trade.
The most important part of your trading 'business' is your capital. You can't afford to risk it all on one trade because you will have losses and you have to have the resources to ride out fluctuations.
Rule 3: I will cut my losses at 5% to 15% when I am wrong without question.
You are going to make losses. It's the nature of the game. But when you do you must be willing to set a point at which you will stop further sliding. Don't go beyond this point. It's must be a rule.
Rule 4: Never set price targets.
You want to make the most out of rising stock prices. Let it ride when the price is going up. It's impossible to pick the top anyway. And sometimes a stock does rise extremely fast. In some cases you're stock will settle and start coming back to earth. Sell then. In the meantime let it go as high as it wants to go.
The big money is made from trading the really BIG moves that I can occasionally catch.
Rule 5: Make one style your own.
Keep learning and getting better at this one method of trading. Never jump from one trading style to another. Master one style rather than become average at implementing several styles.
Rule 6: Make volume and price your guide.
It's almost impossible not to hear gossip, rumor and innuendo regarding stocks. Don't listen to it. Stay focused on price and volume ONLY and close yourself off to other opinions about stocks you are considering or actively trading.
Rule 7: Never ignore signals.
Don't make excuses. If an entry signal shows up you have no excuse not to take it.
Rule 8: Ignore intra-day data. Every trading day includes variations in stock prices. If you rely on intra-day data and momentum trading you'll make mistakes.
Rule 9: Take breaks.
Successful stock trading isn't solely about trading. It's also about emotional strength and physical fitness. Reduce the stress every day by taking time off the computer and working on other areas. A stressful trader will not make it in the long term.
Rule 10: Be a trader above the average.
To be successful in the trading business the key is to simply stay above the average. Stay consistent, focused and disciplined. Remind yourself of your rules regularly and if you start to feel you are straying to any extent force yourself back into line. This is the key to your success. Submit yourself to as tough a scrutiny as you put your trades and you'll be better than most.
About the Author:
You can probably tell James Spacey loves writing about how to make money online, but you might also be surprised to know he also publishes quality information about the best home treadmills (and heaps more).. This article, 10 Top Tips For Penny Stock Success is available for free reprint.
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