Having 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 end up being millionaires overnight … And I have seen millionaires end up being paupers overnight … One story informed to me by my coach is still etched in my mind: ” Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful and chose to share their insights with others by offering their stock market projections in newsletters. Each charged US$ 10,000 for their viewpoints. One trader was so curious to understand their views that he invested all of his $20,000 savings to purchase both their viewpoints. His friends were naturally thrilled about what the two masters had to say about the stock market’s direction. When they asked their friend, he was fuming mad. Confused, they asked their friend about his anger. He said, ‘One said BULLISH and the other said BEARISH!'”.
The point of this illustration is that it was the trader who was wrong. Homebusinessmag.com, and In today’s stock and option market, people can have different viewpoints of future market direction and still revenue. The distinctions lay in the stock picking or choices technique and in the mental attitude and discipline one utilizes in executing that technique. I share here the fundamental stock and option trading concepts I follow. By holding these concepts securely in your mind, they will direct you consistently to profitability. These concepts will assist you decrease your threat and permit you to evaluate both what you are doing right and what you may be doing wrong. You may have checked out concepts similar to these prior to. I and others utilize them due to the fact that they work. And if you remember and reflect on these concepts, your mind can utilize them to direct you in your stock and choices trading.
CONCEPT 1. SIMPLENESS IS PROFICIENCY. Wendy Kirkland I picked this up from}, When you feel that the stock and choices trading approach that you are following is too intricate even for simple understanding, it is probably not the best. In all aspects of successful stock and choices trading, the easiest techniques typically emerge victorious. In the heat of a trade, it is simple for our brains to end up being mentally overwhelmed. If we have a complex technique, we can not stay up to date with the action. Simpler is much better.
CONCEPT 2. NO ONE IS GOAL ENOUGH. If you feel that you have outright control over your feelings and can be unbiased in the heat of a stock or choices trade, you are either a hazardous types or you are an unskilled trader. No trader can be absolutely unbiased, particularly when market action is unusual or extremely irregular. Much like the best storm can still shake the nerves of the most skilled sailors, the best stock market storm can still unnerve and sink a trader extremely quickly. For that reason, one must venture to automate as lots of critical aspects of your technique as possible, particularly your profit-taking and stop-loss points.
CONCEPT 3. HOLD ON TO YOUR GAINS AND CUT YOUR LOSSES. This is the most crucial concept. Most stock and choices traders do the opposite … They hold on to their losses way too long and enjoy their equity sink and sink and sink, or they get out of their gains too soon just to see the price increase and up and up. Over time, their gains never cover their losses. This concept takes some time to master effectively. Reflect upon this concept and evaluate your previous stock and choices trades. If you have been undisciplined, you will see its reality.
CONCEPT 4. BE AFRAID TO LOSE MONEY. Are you like most beginners who can’t wait to jump right into the stock and choices market with your money wanting to trade as soon as possible? On this point, I have discovered that most unprincipled traders are more scared of missing out on “the next huge trade” than they hesitate of losing money! The secret here is ADHERE TO YOUR TECHNIQUE! Take stock and choices trades when your technique signals to do so and prevent taking trades when the conditions are not fulfilled. 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 due to the fact that you traded unnecessarily and without following your stock and choices technique.
CONCEPT 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 big winner that you break your own finance guidelines and put in whatever you have? Do you remember what generally happens after that? It isn’t quite, is it? No matter how confident you may be when entering a trade, the stock and choices market has a way of doing the unexpected. For that reason, constantly stick to your portfolio management system. Do not intensify your expected wins due to the fact that you may end up compounding your extremely real losses.
CONCEPT 6. EVALUATE YOUR PSYCHOLOGICAL CAPACITY BEFORE INCREASING CAPITAL OUTLAY. You understand by now how different paper trading and real stock and choices trading is, do not you? In the very same way, after you get utilized to trading real money consistently, you discover it extremely different when you increase your capital by ten fold, do not you? What, then, is the distinction? The distinction remains in the emotional concern that includes the possibility of losing increasingly more real money. This happens when you cross from paper trading to real trading and also when you increase your capital after some successes. After a while, most traders recognize their maximum capacity in both dollars and emotion. Are you comfortable trading up to a couple of thousand or tens of thousands or hundreds of thousands? Know your capacity prior to dedicating the funds.
CONCEPT 7. YOU ARE A BEGINNER AT EVERY TRADE. Ever seemed like a specialist after a couple of wins and after that lose a lot on the next stock or choices trade? Overconfidence and the incorrect sense of invincibility based on previous wins is a recipe for disaster. All professionals respect their next trade and go through all the correct actions of their stock or choices technique prior to entry. Treat every trade as the first trade you have ever made in your life. Never differ your stock or choices technique. Never.
CONCEPT 8. YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE. Ever followed an effective stock or choices technique just to stop working severely? You are the one who identifies whether a strategy prospers or fails. Your character and your discipline make or break the technique that you utilize not vice versa. Like Robert Kiyosaki says, “The investor is the asset or the liability, not the investment.”. Understanding yourself first will cause eventual success.
CONCEPT 9. CONSISTENCY. Have you ever changed your mind about how to carry out a strategy? When you make changes day after day, you end up catching nothing but the wind. Stock market changes have more variables than can be mathematically formulated.
By following a proven technique, we are guaranteed that somebody successful has stacked the odds in our favour. When you evaluate both winning and losing trades, determine whether the entry, management, and exit fulfilled every criteria in the technique and whether you have followed it precisely prior to altering anything. In conclusion … I hope these simple guidelines that have led my ship of the harshest of seas and into the best harvests of my life will direct you too. All the best.