10 Golden Rules for Making Regular Profits Trading Stocks

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It is really very simple and basic, When you follow your rules you make money. Yet if you consistently break your own stock trading rules then the most probable outcome will be that you will end up losing your money.It is as simple as that.

So once you have a reliable proven set of stock trading rules in place it is very important to keep them in mind at all time when you are trading.

Here is one discipline that if it is cultivated and employed on a daily basis will reap you great rewards. All you have to do is read these rules before your trading day commences and also read the rules again when your trading day closes.

Here below you will see some examples of the types of rules you will need to use if you want to be consistently trading profitably. They are not hard and fast rules,they are just to give you an idea of what is required.So feel free to amend them to suit your style of trading.The most important thing is to have a set of trading rules set up in the first instance..

Rule 1: I must always follow my rules when trading.

It goes without saying, that if you have developed a set of rules then they are meant to be followed. Unfortunately it is only basic human nature to want to vary or break rules and take short cuts. Therefore it will take discipline to act in accordance with your established set of rules.

Rule 2: I will never risk more than 5% of my total portfolio on any one stock trade. (Remember these percentages are variable.)

There are many old traders. There are many bold traders. But you wont find any old bold traders.This is because protecting your capital base is one of the basic fundamentals to profitable stock market trading over any period of time.

Rule 3: I will cut my losses at 5% to 15% when I am wrong without fail.

The key point here is to have set points (stop losses) within the limits of your tolerance for loss Keep yourself informed on the performance of you stock and stick to your stop loss positions.

Rule 4: Never preset your stock price targets.

This is a system that allows me to get the most out of rising stocks. I simply let the profits run, this is because realistically you will never be able to pick the very tops of the stock price. Never feel a stock has risen too high too quickly.

The big profits are made from trading the really BIG moves that are occasionally occurring in a volatile market. Always remember to implement stop loss positions to lock in any profits that you may have already made. There is nothing worse than seeing your hard won profits disappearing before your very eyes just because you neglected to set a stop loss.

Rule 4a Alernatively, you can of course have a pre set profit margin set. This is one system that I use if I am not able to keep eye on the market as much as I would like to. Again this is backed up by a stop loss in case of any unforeseen circumstances that might arise. You can't watch your stocks 24 hours a day.

Rule 5: Master one style.

Keep learning and getting better at one system of trading. Do not chop and change from one trading style to another. Find out which system suits you the best and stick to it. Particularly if it is a profitable one.

Rule 6: Let price and volume be your guides.

Never listen to any other traders opinions, whether it is about the stock market or any of the individual stocks you may be contemplating trading in or are already trading. Everything is reflected in the price and volume.

Rule 7: Take all valid signals that show up.

Do not make your self excuses. If an entry signal demonstrates itself, then you have no excuse not to take it.

Rule 8: Never ever trade from intra-day data.

This is because there will always be a stock price variation within the course of any trading day. If you are relying on this data for momentum trading,you will find that it can quite often lead to some wrong trading decisions.

Rule 9: Take time out from trading occasionally.

Being a successful stock trader is not just solely about trading. There are other things in life which are just as important if not more so. You need to reduce the stress of every day,this is achieved by taking time off the computer and working on other areas. A stressful trader will not make it in the long term, guaranteed.

Rule 10: Always be an above average trader.

In order to be profitable in the stock market you do not need to do anything exceptional. All you simply need to do is the exact opposite of what the average trader does. The average trader is very inconsistent and undisciplined and listens to what other people are saying. Be contrariwise and be confident in yourself and the skills you have acquired.

Bonus Tip. At the end of your trading day, ask yourself "Did I follow my system today?" If your answer is no then you are in trouble and it's time to recommit yourself to your stock trading rules.

Being disciplined is the key to becoming a consistently profitable trader, unfortunately there are no magic wands or shortcuts when it comes to share trading. The minute you treat trading as game then you are heading for financial disaster. So ultimately you get out of it what you put into it. It is entirely up to you.

Chris Strudwick is a successful share trader on the Australian Stock Market. For more info please visit my blog at www.asxnewbie.com.

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