Keep your trades – Trades; and your investments – Investments. The best way to lose money in this game is to confuse the two.
Don’t think you will always be able to ‘breakeven’ before exiting your position – cut your losses now before they get worse.
Always know where your stop loss is before entering into a trade – and make sure you stick to it.
Always have expected target levels and sell a portion of your position when it reaches that level
Plan Your Trade – Trade your Plan
Stay diversified; don’t invest disproportionately in one stock or sector
Don’t let winning trades turn into losers – raise your stop loss when you reach initial target levels
Don’t overtrade your account; wait for just the right opportunity to execute your strategy. Senseless trading runs up a bill in commissions, not to mention pointless losses.
Learn to trade short as easily as you trade long – it will add an entire new dimension to your trading plan. By the way if you are worried about incurring an ‘infinite’ loss, to date no has yet done so…
Read Reminisces of a Stock Operator by Edward Lefervre.
Understand what you are trading in and why. Never blindly follow someone else’s advice, not even ours. Be in agreement and do your own due diligence. If things go wrong, you are less likely to act irrational and panicky.
In the words of Larry Livingston (also known as Jesse Livermore), don’t trade on the long side or the short side, trade on the Right Side.
Paper Trading is a worthless endeavor; put your money to work and you will learn a lot more.
The market is constantly providing even the most experience traders an education with a tuition bill it decides on.
Don’t get mad at the market – it’s a senseless and stupid exercise that does nothing for you.
Don’t blame your problems on the market-makers, insiders, shorts, hedge-funds, big money, or your mother-in-law. Losers are your fault and your fault only.
Document your wins and losses. It will make you a better trader and investor; you will have a better grasp of your weaknesses and short comings.
Focus your efforts on trading flawlessly from your research to your entry to the management of the position to finally the exit. Do this correctly and your profits will take care of themselves.
Cut losses short and let your winners run
Quit allowing fear and greed to dictate your actions.
Don’t let current holdings affect your sentiment of the market or a particular holding.
Stage your positions; don’t allocate all your cash too quickly. Instead over time initiate your trades, swing-trades, and investments and add to them so that you are not impacted all at once by wild market movements
Unless you are dealing with a day trade, don’t open with a full position; instead being with a quarter or half position thus allowing you to take advantage of unfavorable price movements that allow you to average into your position. You can also add to positions that are favorable too.