As a trader, it’s always a good idea to focus on fundamentals on a particular stock. But to become a master trader, you need to lay down a solid foundation and a very solid trading plan, to ensure you become a very assertive and profitable trader. Because in the end, that is what matters most.
Here are the top ten rules of becoming a master stock trader.
Rule 1: Don’t Own Too Many Stocks
It’s much better to focus on a few stocks rather than many stocks because it gives peace of mind.
Rule 2: Cash the Gainers
If you like the market, invest your money now, and make money from it. Then you can cash part of the gainers, and leave money in the market to reinvest. Some of the wealthiest investors have done this, like Warren Buffett and made off like bandits.
Rule 3: You Must Control Your Emotion
When you control your emotions you avoid wrong decisions. How many times have you tried to do a revenge trade right after you have lost money on an investment. Normally 90% of the time, all that happens is you end up becoming flustered and this in turn makes you end up losing even more money. We have all experienced this. So you must learn to meditate each day, and control your emotions, and then in turn, it will give you clear thought throughout the day and make better decisions.
Rule 4: Expect mistakes
Sometimes you will experience good mistakes and bad mistakes, expect it and learn from your mistake, and try to correct it. Bad mistakes happen if we keep repeating the same mistake over and over again. This means you learnt nothing and can throw you into a tail spin. This is something you do not want. So instead make sure you make good mistake, write it down, and learn how to correct it so it never happens again.
Rule 5: Don’t Forget Bonds
Stocks are a great way to invest, but do not forget to invest in bonds too. Many investors think they have to be tied to one vehicle, but there are fast moves in bonds as well, and sometimes depending on geopolitical events, they are even better than stocks anyway. So in the end, the market is not just about stocks, it’s about bonds, treasuries, commodities, sectors. When you open yourself up to other vehicles and sectors there is no looking back. Don’t forget bonds when it comes to diversifying your account. This minimizes your risk, and maximizes your gains.
Rule 6: Don’t back The Losers With Winners
Never sell the good stock in order to buy a bad stock. This is how desperate traders ruin their accounts. You might hear about it, or read about it, but this strategy is long gone, and never works. So never sit in your chair thinking you can pick the next big stock. That is a magic bean that will not work. It’s been tried and tested before and it’s where dumb traders who think they are smart will luck out.
Rule 7: Leave Hope At Your Door
Your emotion of Hope is just an emotion. Remember that. Trading is not a game of emotion. If you feel yourself down, or emotional or have a tragic situation in your life, it’s best to leave trading alone for a few days, until you feel better, or you are in a place where you are more emotionally stable. Traders who are in a good emotive state normally make better decisions and in turn make really nice profits each month.
Rule 8: Be like a piece of Bamboo – Flexible
Be prepared for bigger shits in the market. Sometimes the market goes will go up or down. It’s dynamic. The market is an eating breathing sleeping dragon. Always remember that! It can do whatever it wants, and you will never be able to beat it. If the market moves, try to move in sync with it. If there is clear and defined trend, remember that age old saying. “The trend is your friend” and roll with that.
Rule 9: It’s a Sin to give up on Value
Always be patient when you invest in the stock market. Price is what you pay and that means value is what you get. There are so many things that can go wrong, but price is what pays you. When you realise this, you can make more informed decisions. If a stock is low, it’s low for a reason. You are not buying a quality stock if it’s trading at 3 cents per share. And if you are looking a blue chip stock and it’s $300 per share, it’s up there for a reason, and they move relative to their share price. Always remember that.