Rules in Trading: When in Doubt, Get Out. When satisfied, sell. If a Trade Is Not Working, Move On Stay with the rules Never look back Plan your trades Simple Rules.
Risk trumps all, including hope of gain & fear of loss. Set strict risk limits ($ willing to lose) for each and every trade, use your edge to plan trade and execute according to plan, not how you feel at the time. Trade risk management is essential to capital preservation. Be happy with incremental gains. When the hope of large gains guides your decisions, you've passed from trading to gambling. ~r
^ good point about the stop orders. I have, once in my life, neglected to put a stop loss on a trade. Never again. It might hurt to take a loss but hey, as long as you set the stop loss to an amount that you are comfortable with then you will not lose more than that.
I never heard of that order before, but it seems something really useful. So basically you determine value under which you sell to cut the losses?
Stop loss is not something we can put anywhere we feel like according to our wish, STOPS are always used logically according to candles. When we buy a certain stock with a plan and a certain risk and reward, we make that plan according to candles. we keep our exits plans, exits as in STOPS and upside exits. STOPS are being put below a Hot action buying area, buying area is where investors are standing to buy stocks mostly, like near some hot points, hot points means near Horizontal lines which we call as supports or near some movng avrges points. Those areas are hot action areas and stops we have to put below a buying area, so that once the buy area is broke then its hard for a stock to come back up and for safety we use STOPS to protect our rest of capital. its a deep concept if u cant start my own thread here. Then will teach here from start everything. All the discipline things and how to read candles and best methods as well.
Just remember Stop Loss Orders are not guarenteed. In a rapid moving market or due to a gap down or up, the price van move beyond your stop order, in which case a market order will be triggered and you will be exited from the position at the prevailing market price. The only way to guarantee a certain loss limit price is to hedge using options. Now, I see some have mentioned placing stops according to chart patterns. While this is partially true, I would say it leaves out the most important risk management principle which is to understand ahead of time what you consider an acceptable max loss according to your total portfolio. A rule of thumb might be to not rusk more than 1% of total portfolio on any single position. Could be less or more based on one's risk tolerance. Risk management analysis must be done prior to entry, trying to think your way out of a bad trade while it's happening is usually not a good place to be in. Lastly, one must understand the volatility ranges and distribution of returns overy time. For example if the daily volatility of ABC underlying is 3% and you don't want to day trade it, then placing a stop order 5% below entry could easily result in you getting stopped out in less than 2 days if it goes against you 2 days in a row. If you want to go further you must review implied volatilities relative to historical and run calculations which will provide probabilities or various prices over various timeframes and then size your position appropriately from there.
In one sentence....Invest for the long term. If you don't mind, I would like to expand on the idea. The goal of most types of investing is to buy low and sell high. Sounds simple right?? Well the problem comes from the emotions that enter into the picture, which is why most people do the opposite. They have the best intentions, but then when the market suffers a large correction and prices fall dramatically, most people feel fear that they will lose all their money and sell at a loss because of that fear. The long term investor, however, knows that a correction is a buying opportunity to get the same stocks at lower price. On the other side of that coin, when people see a stock running up, they usually buy in toward the end of that run up and pay a much higher price than they needed to in the first place. This action comes from the emotion of greed and causes folks to make poor investing decisions as well. So the way to win is take emotion out of the picture, look for stocks on sale either during a correction, or just look for a good value stock at any time, and invest for the long term. That way you are not tempted to buy high and sell low, which, oddly enough, is what happens to most people most of the time.
Great advice - like they said, study up on a multitude of stocks you feel are worth an investment. That always helps, even if you do not invest in those stocks anytime soon.
Yes it's good to always have a wish list so when a buying opportunity comes along, you are ready to seize it. I have found some really good advice at a few sites online. The best free site I have run across is Seeking Alpha. The contributors are professionals and the articles are very informative. Then in the comments below the articles, you can get some additional information that is often times more pertinent than the article itself. These types of sites have some excellent suggestions for you to begin developing that wish list.
