Author: Val Wilson Added: August 13, 2008
Investing in the stock market is very profitable, but there are risks if you don't know what you are doing. There are 8 strategies which set the winners out from the losers. 1. Develop a Clear Strategy. Successful stock trading requires having a clear plan at the outset, and consistently following through on this plan. The market changes every day, and without a clear strategy it is all too easy to be knocked off course. In particular, you must have a clear set of entry and exit criteria, and these must be rigidly followed. Shooting from the hip is not a successful stock trading strategy. 2. Be Consistent. When you have your strategy in place, do not deviate from it. It can be tempting to invest at every available opportunity, even in investments which are outside your overall strategic plan. Do not place trades just for the sake of it. A small number of carefully planned and executed trades will be profitable; blind trading will inevitably lose. 3. Be Patient. Always remember that slow and steady wins the race. Many investors lose because they want to become rich over night, but it takes patience and perseverance to be a successful stock trader. You must wait for the almost certain trading opportunities, according to your own well defined strategy, which will allow you to make good profits. 4. Be Realistic. No matter how good your system is, you are going to have some losing trades. Don't be disheartened by this! It is a natural part of the trading business and even the most experienced and successful traders do have losing trades. Accept your losses, forget about them and turn your mind to the next trade. 5. Manage Your Money. Although it can be minimized by following a proven plan, stock trading does involve an element of risk so it is vitally important that you do not trade with money you cannot afford to lose. Set profit targets as part of your long term strategy, and as your targets are reached, adjust your trading levels accordingly. 6. Manage Your Risk. Do make sure you assess the level of risk for each and every trade that you take. Trade only if the trade fits with your strategy, and meets your risk profile requirements. 7. Take Action. Always be prepared to act when the market leads you. Remember that time is money. If you procrastinate, you will lose. Again, have a system in place, and follow it to the letter. 8. Control Your Emotions. Never let your emotions ride roughshod over your rules. In the event that you make a losing trade, be prepared to admit that you have made a mistake, and cut your losses. Equally, do not let gossip or hearsay affect your decision making process - stick to the facts. There are always sectors of the market which prosper, irrespective of the underlying trading conditions. Your success boils down to getting a sound trading plan that is right for you, and implementing it correctly.
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