Here's a list of my 10 top trading rules, posted for a long time on the original Forum. I still believe in most of these rules, although I might think about re-prioritizing a few of them based on recent experiences....
September 11, 2010 9:51 PM
The Top 10 Important Concepts for the Modern Day Stock Trader/ Investor 10. If you trade rather frequently, be sure you use a discount broker with low fees. The fees really do add up over a year's time and can consume a significant percentage of your assets. This was a hard lesson for me over the years to learn. If you make 25 trades a month (not atypical today!) at $14 a trade, that amounts to $4,200 a year in broker commissions. If your trading account averages $50,000, then that $4,200 amounts to over 8% of your assets. You have to gross better than 8% a year just to come out above break-even! Not even the costliest mutual funds have an 8% nut to crack! 9. Even when you have a low discount broker, be careful not to trade too often...the low fee makes it more tempting to trade more often...Yet, the discount brokers discovered over the last few years that they can make it up on volume! 8. Never use stop-loss limits. The big traders can see your stop losses on their Level II and Level III trading platforms. You set yourself up for disappointment as the big traders will take out your stock at the lowest possible price you were willing to part with it. 7. When buying or selling stocks, DO use limit orders! Why? Because the market maker will usually give you the worse available price. In some cases, the flash trading systems are moving so quickly with bid/ask spreads, you can lose quite a bit of money compared to the price you thought you were going to get! 6. Don't pay a lot of attention to the "experts" on financial advice boards. On these sites, so-called experts are wheeled out from time to time to throw water on a hot stock that you might own. These experts have strong looking credentials--they might be some sort of industry insider, or they might be a financial journalist who covers news in the investment sector that your favorite stock is in. These experts will come on these boards and try to scare you out of your stocks for reasons (excuses) such as your stock is "over-valued" or "over-bought." What I have found is that in some cases, they seem to have a hidden agenda. 5. Watch for stocks that are consistently trading well and study their trading patterns for possible entry and exit points. Stocks that trade consistently higher over time tend to keep doing so. 4. Don't fall in love with your stocks! Sell stocks that are losers as quickly as possible. Don't hang on to a stock when it isn't doing what you thought it would. 3. When you have substantial profits, don't be afraid to ring the cash register! Understanding advanced charting principles and techniques can help a person to figure out when it's time to leave the party before the hangover sets in. 2. Be careful not to chase hot stocks that are running higher on heavy hype! An over-extended rally is usually a recipe for disaster. 1. Use discipline and keep emotions out of the game! This is my number one rule for smart trading and investing. This rule sort of extends on rule #4 which says to never fall in love with your stocks. It takes a long time to develop this stone-cold type emotion to trading. I know because it took me some time to develop this type of discipline in my own trades. This site and its message board reflects opinions of individuals only, and should not be understood to offer advice on investing or trading. Investing in stocks, bonds, options, futures or other uninsured investments can lead to substantial financial losses. Always consult a Registered Investment Advisor/Broker. Visit my blog at http://www.Blog.AceStockTrader.com .
ALL OPINIONS, IDEAS AND DISCUSSIONS ARE BY ANONYMOUS PEOPLE. NEVER ACCEPT ANY COMMENTARY ON THIS FORUM OR WEBSITE AS INVESTMENT ADVICE. ALWAYS CONSULT A LICENSED BROKER OR REGISTERED INVESTMENT ADVISOR. WE ARE NOT RESPONSIBLE FOR YOUR ACTIONS. Enjoy the forum! Thanks, Mike