12 Basic Rules of Trading For Living for Stock Traders

If you are thinking about becoming a full-time stock trader to trade for a living, feeding yourself and your family from your home investment office, then you should be aware of some very basic rules to reduce the risk of losing money and to maximize profits when buying and selling shares.

Trading stocks is not a get rich quick scheme, but it very well can be a get poor quick scheme if you don't pay attention.
There are 12 Basic Trading Rules that will help you to evaluate if that is really a career you want to pursue, and if you do, how can you secure your professional skills and financial returns:
  1. You do not have to be a certain type of person to be a successful stock trader. True, the guys who analyze the market and pick the big winners are almost 60%. But there’s something for every type of thinker in stock trading. The trick is to find what works best for you. Learn the stock market first up to the point, when you can see yourself clearly as part of it. Than be creative to shape up your personal approach and professional attitude.
  2. No one can predict the future, so don't even try. Don't try to "time the market". Just learn how to read the market signals and let it keep heading in the direction it's heading in until something happens to turn it around. Go with a flow, develop or buy into an existing stock trading system, and stick with it.
  3. Big scores come from position sizing. Position sizing is the process of determining HOW MANY contracts to trade when your system gets a signal. Position sizing is one of the most important and least understood concepts with losing traders. The purpose of position sizing is to control risk, enhance returns and increase robustness through market normalization. Position sizing can end up being more important than when you actually buy or sell! Unfortunately, most systems and testing platforms seem to ignore it completely (or worse, apply it illogically).
  4. Everything is about price, price, and price. Stocks do not follow fundamentals just because you want them to. Prices change based upon the perceptions of the buyers and sellers. And perception of the investors cannot always be justified by the objective stock market signs.
  5. Don't take your advice from the big money management funds. They don't seek to outperform the stock market, they seek to manage everyone's money as risk-free as possible and make a lot of money from fees. Pick stocks based upon what YOU want as far as risk and performance is concerned. Develop your own strategy, building its base on your personal preferences, your strong and week points, and all the information you can get from any sources.
  6. Don't depend solely upon technical analysis. Stocks trade based upon fear, greed, and perception. All of the technical analysis in the world isn't going to help you if the market reacts to a company's product liability lawsuit and the stock heads south. But, if your trading strategy says it's time to buy or sell, then it's time to buy or sell.
  7. Question everything your read and everything you hear. Don't follow anyone, anywhere, as long as it's your money that is at risk. Hot tips tend to become hot flops when it's all said and done. We live in a "pump and dump" world, stay clear of rumors. But keep your ears open for any new possibilities and opportunities. Check, double-check, and triple-check the validity of your decision, but when you made it – go for it without hesitation.
  8. If your guts say to go against your own system and self-developed rules, think twice before follow your guts, and decide against it. If your system says "No", then it is unwise to break the theory -- no matter how good the trading step might look at the time. The whole reason to have treading rules is so you are not tempted to make decisions based upon fear or greed. Let your system guide you.
  9. Never respond to fear or greed. No one can beat the market every time. Make the rights moves in a bull and bear market and you could see returns of 300%+. Do not beat yourself for every loss. Consider it as a part of the learning curve, and your losses as tuition for your training. Analyze thorough the reasons for the failure, and if you can trace it to your strategy, make necessary adjustments.  
  10. Make sure that you have the "right stuff" to be a full time trader. Don't trade with "scared money". Don't trade blindly without a system. Don't borrow money to trade. Have the guts to stay with your system even when it seems to be going against you. If you keep loosing, stop trading and see what you are doing wrong. Chances are you stopped following your system.
  11. There is more to life than trading the stock market. Get out, go for walks, and spend time with your family. Live, breathe, eat, swim, go to a movie. Your brain needs a break!
  12. Before giving up our occupation in favor of full-time stock trading, try first it as hobby, next as side occupation, and if you like yourself in this position, consider of making it a full-time profession. You will succeed if you have fun doing that. It is not all about money. Your life is too short to sacrifice it for any size of the potential returns, if you do not like what you are doing.
And good luck to you, whatever you decide after reading this post!

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