Trying to become a master at anything takes thousands of hours of study and research. I’m still learning everyday. No matter how long you’ve been trading stocks you always need to go back and remember the basics. Here are the 5 most important things every new and seasoned stock traders should remember in order to stay successful…
5. Don’t Chase, Fibonacci Retracement.
High flying stocks, ripping on volume can make you a lot of money. But you can also lose…and lose big. If you’re a swing trader, entries are everything. If a stock is ripping, at high of day, or its up 30, 40, 100% and you decide to buy, then you should be prepared to have a firm stop, and stick to it. Knowing breakout and resistance levels will help you make better lower risk entries. Fibanocci retracments is a great tool to utilize when dealing with these type of stocks. If you don’t get your desired entry don’t take the trade or consider reducing your position size to reduce exposure.
4. Keep Emotions out of your Trades.
This will be the hardest thing to learn and practice. Its always going to be there, but reducing it as much as possible will help you in the long run. Emotions can cause you to lose focus of your strategy. Eventually your emotions will lead you in the right direction after you’ve been trading for a while and you can start to rely on them to make better decisions.
Related Blog Post: How to Control you Emotions while Trading
3. Learn to Read Charts.
Reading charts will make you a better trader. The better you are at reading charts, the higher your chances are that you will be ahead of other traders. Learning how to react to volume, price changes and moving averages will help keep you on top of the game. You should already be familiar with Steve Nison’s candle charts, if not, stop what you’re doing right now and go to his website. Every trader needs to know Nison’s basics to candle charting at the very least. Check out his site www.CandleCharts.com
2. Don’t let Greed affect your Trading Principles.
Every single one of us have been there. If you’re being greedy, you aren’t following the rules. You’re not protecting your profits, playing too large size, not paying yourself or taking on too much risk. Greed is a nasty thing. It’s what leads most traders to failure. We all can’t deny that we want the most profit, we want to wake up in the morning and have a 50% winner…its not likely, and you shouldn’t increase your risk for something that can be so uncertain.
Related Blog Post: Is Being Greedy Hurting your Profits?
1. Risk Management.
The most absolute important part of trading stocks. Your calculated risk should be considered in every single trade. It’s what determines your max risk, profits and position size. If you are entering a trade without asking yourself what your profit to loss ratio is, then you shouldn’t be trading. It lowers your stress levels because you know that you’re prepared to lose a set amount and if you get stopped out, you just move on to the next trade. Tip ~ Set your max stop in relation to important resistant levels (or just below) and size your position accordingly. This will help keep you from getting stopped out too soon and gives your trade more room to work in your favor.