YOUR TRADE AND TRADE YOUR PLAN. You
must have a trading plan to succeed. A trading plan should
consist of a position, why you enter, stop loss point, profit
taking level, plus a sound money management strategy. A good
plan will remove all the emotions from your trades.
2. THE TREND IS YOUR FRIEND.
Do not buck the trend. When the market is bullish, go long.
On the reverse, if the market is bearish, you short. Never
go against the trend.
3. FOCUS ON CAPITAL PRESERVATION.
The most important step that you must take when you deal with
your trading capital. You main goal is to preserve the capital.
Do not trade more than 10% of your deposit in a single trade.
For example, if your total deposit is $10,000, every trade
should limit to $1000. If you don't do this, you'll be out
of the market very soon.
4. KNOW WHEN TO CUT LOSS. If
a trade goes against you, sell it and let go. Do not hold
on to a bad trade hoping that the price will go up. Most likely,
you end up losing more money. Before you enter a trade, decide
your stop loss price, a price where you must sell when the
trade turns sour. It depends on your risk profile as of how
much you should set for the stop loss.
5. TAKE PROFIT WHEN THE TRADE IS GOOD.
Before entering a trade, decide how much profit you are willing
to take. When a trade turns out to be good, take the profit.
You can take profit all at one go, or take profit in stages.
When you've recovered your trading cost, you have nothing
to lose. Sit tight and watch the profit run.
6. BE EMOTIONLESS. Two biggest
emotions in trading: greed and fear. Do not let greed and
fear influence your trade. Trading is a mechanical process
and it's not for the emotional ones. As Dr. Alexander Elder
said in his book Trading For A Living, if you sit in front
of a successful trader and observe how he trades, you might
not be able to tell whether he is making or losing money.
That's how emotionally stable a successful trader is.
7. DO NOT TRADE BASED ON A TIP FROM
A FRIEND OR BROKER. Trade only when you have done your
own research and analysis. Be an informed trader.
8. KEEP A TRADING JOURNAL. When
you buy a currency or stock, write down the reasons why you
buy, and your feelings at that time. You do the same when
you sell. Analyze and write down the mistakes you've made,
as well as things that you've done right. By referring to
your trading journal, you learn from your past mistakes. Improve
on your mistakes, keep learning and keep improving.
9. WHEN IN DOUBT, STAY OUT. When
you have doubt and not sure where the market or stock is going,
stay on the sideline. Sometimes, doing nothing is the best
thing to do.
10. DO NOT OVERTRADE. Ideally
you should have 3-5 positions at a time. No more than that.
If you have too many positions, you tend to be out of control
and make emotional decisions when there is a change in market.
Do not trade for the sake of trading.