The 16 ¾ Golden Rules of trading the Stock Market
By: Marcus de
Untitled document
The 16 ¾ Golden Rules of trading the
Stock Market 1. Have a vision for wealth and know your reasons ‘why’ you are trading · Write down your reasons why you are trading· Connect with your REAL reasons why you want to make money - the ones that get you emotional are the ones you are looking for· Write them down - the more descriptive, the better (see, hear, feel, smell, etc…)· Look at them as often as you can· Ensure you consistently take action· Helps you focus when you take inevitable losses· At an IM workshop, we find out your ultimate vision for wealth and why you want it so you can literally see, hear, touch and smell it; then we get you to do exercises which will motivate you into action on a consistent basis and ensure you achieve it 2. Have written goals with deadlines · Once you have your vision (from the workshop) divide it into yearly goals· Then break it into monthly goals· Now you know how much you need to achieve in that month· Decide which of the 3 strategies we teach is going to ensure you achieve your monthly goal· At the workshop we break down your ultimate vision into manageable goals and encourage our graduates to measure success on a monthly basis 3. Work on your psychology and your beliefs around wealth/money and around trading on a consistent basis · Recognise the importance of mindset – 80% really is mindset and only 20% is skill· Often we are carrying around beliefs that have been thrust upon us by parents, siblings, peers, teachers, friends, television and the media. There’s a chance that these may be stopping us from becoming wealthy· At an IM workshop, we focus on spending time looking at your beliefs about ‘wealth’, ‘money’ and ‘excess’ and replacing beliefs that no longer serve you with ones that allow you to make money 4. Get a mentor – someone who is already where you want to be · Just surrounding yourselves with positive friends is good, but not enough to be really successful· You need to find someone who is already where you want to go now and who is willing to help you – that is a real mentor· You must get their recipe – the exact formula and the order in which they used it to create their wealth· Before, during and after an IM workshop we mentor you to ensure that you achieve your outcome. During the workshop we talk about how you can take a millionaire out for lunch to extract their recipe for making money. After the workshop we buddy you up with a successful investor to mentor you 5. Focus on one strategy until you master it, before you start the next one· Learning too many strategies at once is confusing and that is why most financial seminars don’t work· Learn one strategy and master it – learn all the different rules and permutations until you are the absolute best at it· Anyone else looking at it would not see the distinctions, no matter how small, that you see· A good idea is to print out a chart every time you decide to trade it. Keep a record of what worked and what didn’t in your trading diary (see Golden Rule 13)· At an IM workshop, we teach 3 strategies that take advantage of up, down and sideways markets in a workshop environment. This enables you to ask questions and repeatedly practice charting, putting in orders in computers etc, while the trading coach is in the room. At an IM workshop, we encourage our students to first master one strategy before moving on to the other two. Remember Karate Kid? “Wax on, wax off” – that’s real mastery 6. Make your trading decisions when the market is closed to avoid your emotions interfering· When markets are open, it is too easy to get emotional as the stock either moves in your favour or against you· To avoid the emotions of fear and greed, the best way is to make all trading decisions after the market has closed· At an IM workshop we do most of our stock selection at the week-end when the markets are closed. That way you can make decisions and place your orders while you are relaxed and thinking properly. We also teach you not to trade the first ‘fools hour’ or the last hour 7. Before entering trade, check that the pattern/strategy works for this stock · By looking at historical charts of a stock, you can test whether a stock has a character that is appropriate for a particular strategy· If it does, then you are putting the odds in your favour by trading this stock· If it doesn’t, it would be foolish to use this stock· At an IM workshop, we show you how to set up your free charting software to do just that 8. Have written trading rules, and follow these rules · When you have a strategy, this strategy must have a set of rules (When to buy, when to sell, how much money to put into a trade, what price you think that stock is going to go to, when to sell at a loss etc.)· You must write these rules down and have them displayed where you trade· You must obey these rules, without questioning them, because that is the way you will make money· Don’t second guess them – the day you do that they are worthless· At an IM workshop, we do a fun exercise that illustrates well the importance of sticking to your written rules! Our graduates never forget the lesson of the exercise, and nor will you 9. Cut your losses short … · Most people don’t like to take losses and so they let them run, hoping the loss will miraculously turn around. The more the loss, the less people want to take it. At some stage, they might even buy into the stock again because “now it MUST turn around”· Instead, when entering a trade, always place a stop loss order at a pre-determined price. Never cancel that order, just move it up as the trade turns profitable and so lock in the profit· In the event of a loss situation, the broker will get you out of the trade – they are not as emotional about it as you· At an IM workshop, we show you exactly how to let your profits run using your online broker 10. … and let your profits run! · Most people get emotional when they have made a profit and sell much too early just because they are scared of losing that profit, even when the stock would have been happy carrying on and making more profits· Instead, put a stop loss when you enter a trade. As the stock starts making profits, move the stop loss up to lock in the profits.· At an IM workshop op, we show you to do just that. We show you how to let your profits run and cut your losses short. It’s simple when you know how 11. Never allow a profitable trade to turn into a losing trade · This is linked to letting your profits run and cutting your losses short, but it deserves its own rule· Imagine you are 5% up on a trade. Can you imagine allowing that trade to go to 0% and then even -5%? That’s just crazy· At IM, our students know that once a trade is profitable, we ensure it never turns into an unprofitable trade. It is like a mantra for our graduates. · At an IM workshop we show you exactly how to continuously raise our stop losses as the trade increases in profit – that way profits are locked in, and a profitable trade will not turn into an unprofitable one. This ensures you grow your money 12. Avoid trading a stock near its earnings period · Earnings announcements is the time when the company announces to its shareholders whether they are doing as well as projected or not· The reason we don’t like to be in a stock at this time is because the market reacts very emotionally to these announcements, and while this could be a good thing for the stock, it could also be a bad thing. We don’t want to take that risk· At an IM workshop, we teach you how to get this information, and how to avoid getting into stocks that are within a certain period of their announcement 13. Let the price tell you when to enter the trade (not ‘lagging’ indicators!) · There are many indicators that can help ‘indicate’ what might happen next. Some give conflicting advice.· While it is a good idea to have as many indicators showing the same thing and therefore stacking the odds in your favour, never guess and get in early, hoping the stock is going to move in your desired direction· It is only the price that is able to really tell you what is happening· At an IM workshop, we teach you to place orders that get triggered only when the price moves in your direction, usually when the price breaks through something. In other words, we know in advance when we want to enter the trade and so send an order to the broker, so that you only enter a stock that is moving in your desired direction 14. Learn from your mistakes and successes by keeping a trading diary · The only way to become an outstanding investor is to learn from your mistakes and your successes.· The best way to do that is to keep a ‘trading diary’. It can take the form of a notepad or an excel spreadsheet· This captures all the reason why you entered a trade, ticker, entry price, proposed exit price, reasons for entering the trade, etc.· It is a good idea to print a chart of the stock so that you can go back to it later· AT an IM workshop, we give you a template to fill in so that you accelerate your learning – it will massively improve your trading 15. Have fun along the way – you’ll get to your destination faster · This rule is so important, that we give it a full 1 ¾ points. It is amazing that more people don’t teach it· You only live once, you might as well enjoy it· Relax and know you will succeed and success will come much easier … and faster!· Don’t take things personally – the market just does its own thing· Share this knowledge with as many people as you can· At an IM workshop, our graduates are taught that trading is just a part of life and not everything. That is why we teach you several strategies so that you can choose the ones to fit into your lifestyle 16 ¾. Never give up – success is just around the corner! · Too many people give up just when they were about to make it. What a shame – success was just around the corner· You can make it if you just dare to dream long and hard enough· At an IM workshop, we set up a learning environment that allows you to embrace success, both before, during and after the course through prep work, home-play and 3 months of follow up support. Graduates tell us that the support was a crucial element in their success At Investment Mastery, we know that reading these Golden Rules will make sense, but are abstract theory unless you start investing and put them into practice
Summary
- Have a vision for wealth and know your reasons ‘why’ you are trading
- Have written goals with deadlines
- Work on your psychology and your beliefs around wealth/money and around trading
- Get a mentor – someone who is already where you want to be
- Focus on one strategy until you master it, before you start the next one
- Make your trading decisions when market is closed to avoid emotions
- Before entering trade, check that the pattern/strategy works for this stock
- Have written trading rules, and follow these rules
- Let your profits run
- … and cut your losses short!
- Never allow a profitable trade to turn into a losing trade
- Avoid trading a stock near its earnings period
- Let the price tell you when to enter the trade (not ‘lagging’ indicators!)
- Learn from your mistakes & successes by keeping a trading diary
- Have fun along the way – you’ll get to your destination faster
- 16 ¾. Never give up – success is just around the corner!
About the author: Marcus de Maria has been called Wealth mentor, coach and writer, is a ‘full time’ trader and has been featured in The Business newspaper, Inside Business, Shares Magazine, Moneywise and has been interviewed on radio. His mission is to get Britain trading successfully and to help people make consistent profits in the stock market. For more information, contact Investment Mastery on 0870 835 2260 or go to www.investment-mastery.com for details of free evening investment tutorials.
|
