Thinking You will be the Next Penny Stock Trading Superstar
Our stock trading rules is our money. When you follow your rules you make money. However if you break your own stock trading rules the outcome is that you will lose money.
Establishing your rules is the first thing. Then you must remember them and always stick to them like glue. When it comes to trading penny stocks you’ll need discipline to succeed. Write these rules somewhere you can see them and read them regularly.
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: I will never risk more than 3% of my total portfolio on any one stock trade.
You must protect your portfolio. Don’t be bold and try to risk it all (or even a significant portion of it). As your portfolio grows, so will your 3% and you’ll increase your profits. But if you lose it all…
Rule 3: When I lose on a trade I will always cut my losses at 5% to 15%. Without question.
You must initiate a stop loss system so that even when you make an error on a trade you can make sure you don’t go in too deep. It is better to cut and run at 5% than hope for a recovery and lose the whole value of your investment.
Rule 4: Refuse to set price targets.
Stock prices can sometimes make dramatic rises. Don’t set a price limit and miss out of more profits. It’s better to risk missing the top and selling after it peaks. Who can predict the top anyway? It’s impossible. You will have a chance to get a better price than a target if you stick to this rule religiously.
The highest profit trades are the ones that just keep going up and up. You will catch these occasionally.
Rule 5: Master one style.
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: Let price and volume be my guides.
Put blinkers on and block your ears to the sound of opinion and rhetoric. It’s all about price and volume. Just because you hear something on a finance report doesn’t mean anything. Stick to the facts.
Rule 7: Pay close attention to all the signals.
You have decided to trade on signals for a reason. So if you get an entry signal you take it. No questions.
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: Have rests.
Stress is a big influence on every person. To be a successful trader you must be physically, emotionally and mentally fit. Don’t spend all day on the computer. If you don’t take active measures to manage your stress you’ll make mistakes and burn out.
Rule 10: Get 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.
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on November 9, 2010. Filed under 
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