There are no hard and fast rules for trading. Investor usually adopts technical analysis or fundamental analysis or a combination of two or even using intuition to trade. Whichever method one adopts, investor should have a basic rule for limiting risk. This critical strategic component is perhaps the most overlooked part of a successful trading strategy. It is imperative that an investor plans his trade prior to execution. Here is a guide that investor should adhere to in trading.
- Trade with a DISCIPLINED Plan
- Examine all the facts carefully before a trade
- Do not out-smart or out-guess the market
- Do not let temporary circumstances erode your convictions
- Remain emotionally detached from the market and the excitement that its movement creates
- Stay focused on the large trends
- Unexpected things, both good and bad
Being a trader, one should not trade based on a "feeling" or "hunch." It is necessary to have a plan which is to have stop and limit levels for the trade, as your trade analysis should encompass the expected downside as well as the expected upside.
Do not let excitement, fear, or someone else's influence cause you to enter or exit a position before the circumstances match YOUR guidelines.
A good trader understands that there are times when it is better to be in an all cash position and watch the market from the sidelines.
Stick to your trading strategy.
Do not constantly check your prices all day long (unless you're day trading). If you get caught up in "tick" watching then you are going to make wrong decisions based upon greed or panic. There is no valid psychology that includes greed or panic.
Do not try to react to every market move.
Understand these events, be prepared for them, and take the appropriate actions. A good psychology takes into consideration that you cannot predict what is going to happen in the market.
