|1. PLAN 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
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
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.