Having been trading stocks and alternatives in the capital markets professionally over the years, I have actually seen numerous ups and downs. I have actually seen paupers become millionaires overnight … And I have actually seen millionaires become paupers overnight … One story informed to me by my coach is still engraved in my mind: ” As soon as, there were two Wall Street stock exchange multi-millionaires. Both were extremely effective and decided to share their insights with others by selling their stock exchange forecasts in newsletters. Each charged US$ 10,000 for their viewpoints. One trader was so curious to know their views that he invested all of his $20,000 savings to buy both their viewpoints. His friends were naturally thrilled about what the two masters needed to say about the stock exchange`s direction. When they asked their good friend, he was fuming mad. Confused, they asked their good 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. In today`s stock and option market, people can have various viewpoints of future market direction and still revenue. The differences lay in the stock picking or alternatives technique and in the mental attitude and discipline one uses in executing that technique. I share here the basic stock and option trading concepts I follow. By holding these concepts securely in your mind, they will direct you regularly to profitability. These concepts will assist you reduce your threat and enable you to examine both what you are doing right and what you might be doing wrong. You might have checked out concepts comparable to these before. I and others utilize them since they work. And if you memorize and reflect on these concepts, your mind can utilize them to direct you in your stock and alternatives trading.
CONCEPT 1. SIMPLENESS IS MASTERY. Wendy Kirkland I learned this from Wendy Kirkland Books, When you feel that the stock and alternatives trading technique that you are following is too complicated even for basic understanding, it is most likely not the very best. In all aspects of effective stock and alternatives trading, the most basic approaches often emerge triumphant. In the heat of a trade, it is simple for our brains to become emotionally overwhelmed. If we have a complex technique, we can not keep up with the action. Easier is better.
CONCEPT 2. NO ONE IS GOAL ENOUGH. If you feel that you have outright control over your emotions and can be objective in the heat of a stock or alternatives trade, you are either a hazardous species or you are an inexperienced trader. No trader can be definitely objective, particularly when market action is uncommon or hugely erratic. Similar to the perfect storm can still shake the nerves of the most seasoned sailors, the perfect stock exchange storm can still unnerve and sink a trader very quickly. Therefore, one must strive to automate as numerous crucial 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 essential concept. A lot of stock and alternatives traders do the opposite … They hang on to their losses way too long and view their equity sink and sink and sink, or they get out of their gains prematurely only to see the rate go up and up and up. Gradually, their gains never cover their losses. This concept takes some time to master correctly. Contemplate this concept and evaluate your previous stock and alternatives trades. If you have actually been undisciplined, you will see its fact.
CONCEPT 4. HESITATE TO LOSE CASH. Are you like many novices who can`t wait to leap right into the stock and alternatives market with your cash wishing to trade as soon as possible? On this point, I have actually found that many unprincipled traders are more scared of missing out on “the next huge trade” than they hesitate of losing cash! The secret here is ADHERE TO YOUR STRATEGY! Take stock and alternatives trades when your technique signals to do so and avoid taking trades when the conditions are not fulfilled. Exit trades when your technique states to do so and leave them alone when the exit conditions are not in place. The point here is to be scared to get rid of your cash since you traded unnecessarily and without following your stock and alternatives technique.
CONCEPT 5. YOUR NEXT TRADE COULD BE A LOSING TRADE. Do you definitely believe that your next stock or alternatives trade is going to be such a huge winner that you break your own money management rules and put in everything you have? Do you remember what typically occurs after that? It isn`t pretty, is it? No matter how positive you might be when getting in a trade, the stock and alternatives market has a way of doing the unforeseen. Therefore, always adhere to your portfolio management system. Do not intensify your anticipated wins since you might wind up intensifying your very real losses.
CONCEPT 6. GAUGE YOUR EMOTIONAL CAPABILITY BEFORE INCREASING CAPITAL OUTLAY. You know by now how various paper trading and real stock and alternatives trading is, do not you? In the very same way, after you get used to trading real cash regularly, you find it extremely various when you increase your capital by ten fold, do not you? What, then, is the difference? The difference is in the psychological problem that includes the possibility of losing a growing number of real cash. This occurs when you cross from paper trading to real trading and also when you increase your capital after some successes. After a while, many traders understand their optimal capacity in both dollars and emotion. Are you comfortable trading up to a few thousand or 10s of thousands or hundreds of thousands? Know your capacity before dedicating the funds.
CONCEPT 7. YOU ARE An AMATEUR AT EVERY TRADE. Ever felt like an expert after a few wins and then lose a lot on the next stock or alternatives trade? Overconfidence and the false sense of invincibility based upon previous wins is a recipe for disaster. All professionals appreciate their next trade and go through all the appropriate steps of their stock or alternatives technique before entry. Deal with every trade as the very first trade you have actually ever made in your life. Never differ your stock or alternatives technique. Never.
CONCEPT 8. YOU ARE YOUR FORMULA TO SUCCESS OR FAILURE. Ever followed an effective stock or alternatives technique only to stop working severely? You are the one who identifies whether a strategy prospers or stops working. Your personality and your discipline make or break the technique that you utilize not vice versa. Like Robert Kiyosaki states, “The financier is the asset or the liability, not the financial investment.”. Understanding yourself initially will lead to ultimate success.
CONCEPT 9. CONSISTENCY. Have you ever altered your mind about how to execute a strategy? 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 developed. By following a proven technique, we are guaranteed that someone effective 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 actually followed it precisely before altering anything.
In conclusion … I hope these basic standards that have actually led my ship out of the harshest of seas and into the very best harvests of my life will direct you too. Best of luck.