You must learn to take control of your financial destiny. Leaving your money and portfolio in somebody else’s hands could spell disaster down the road. You must learn to manage and control your money. You earned it. By learning some simple rules and applying them with regularity, you’ll reduce your risk substantially. It’s crucial to learn how the “game” is played. You’re either playing the game or the game is playing you. Don’t listen to the financial gurus and talking heads in the media. Learn to trade the markets for yourself. Stop paying high fees for low returns. Protect your capital. Take the time to learn a few rules and strategies and then take the time to apply them. Learn technical analysis and how to read stock charts. Learn how to put the odds of a successful trade in your favour. Einstein said that if you study something for 15 minutes a day you can become an expert at it within a year. Use technical analysis to know when to buy and when to sell. There are rules based strategies that can keep you on the right side of any trade. Get the right education, follow your rules, and develop the proper mindset and you will succeed.
Without further ado, KaizenTraders’ 11 rules for trading success:
1. Trade with a plan. Plan your trade and trade your plan. Define your entries and exits before the trade. You should define an initial stop for your trade to protect your capital. Keep emotions out of the equation. Know your risk/reward on each trade and define beforehand how much you are willing to lose if the trade goes against you…and where to take profits if the trade goes your way. By writing down your plan, you put yourself in the top 3% of people who have written goals and plans, which gives you an edge as a trader. You are looking for low risk high reward plays. Make sure you are following your rules for entry, exit and money management. Make sure your plan works in current market conditions.
2. Define what type of trading style is right for you. Are you a day trader, swing trader, short or long term trader?
3. Use your charts. Look at the different time frames to see the overall trend and see where the price action is currently within that trend. Trust your charts.
4. Where is the price as far as the moving averages go? Is it above the 9 ema, 20 ema for short term trades… the 50 ema for intermediate trend or the 200 ema for longer term? Are the averages sloping up or down? Are any crossing over or under the other?
5. Always cut your losses quick and ride your winners. Perfectionism keeps traders from taking losses quickly. They are afraid to admit they were wrong and looking bad in someone else’s eyes. So they wait for the stock to come back and not admitting that it went even lower and they didn’t get out. That’s just ego talking. Take the small loss and move on to the next trade. Don’t tie up your capital in a losing trade. Use it on a winning trade. Make more on your winners than you lose on your losers and you’ll make money.
6. Trade liquid stocks in liquid markets with at least 500,000 shares trading per day so you have no problem getting out of a stock you want to sell.
7. Don’t listen to the “gurus” or “talking heads”. Learn to trade for yourself and use technical analysis and your charts to make your trading decisions.
8. You will have winners and you will have losers. That’s trading. Losing is part of the cost of doing business as a trader. Learn from your losses and move on to the next trade. They cannot all be winners. Set a mental or hard stop loss to protect yourself if the trade goes against you. There is always another trade just around the corner. Never chase a stock…let it come to you. Professional traders concern themselves with how much they could lose as opposed to how much money they can make. Know how much capital you need to trade successfully. How much of your capital will you invest in each trade percentage wise? You don’t want to blow up your account. You want to survive to trade another day.
9. Trade when the trend is your friend. Make sure the markets are up, your sector is up and the stocks in that sector are up…make sure everything is aligned to put the probability of a successful trade on your side. Do not go against the trend.
10. Keep a journal of your trades so you can learn from your successes and your mistakes. You should write down daily observations, did you follow your trading plan? What did you do right and what did you do wrong? What lessons were learned? Keep a log of all your trades with comments. Measure your results. Know what your best trade strategies are and keep using them as long as they are working. If they stop working for any reason change your strategy to one that works. Don’t fall victim to complacency or conformity. Kaizen trading is all about flexibility and continuous improvement. All-ways be improving.
11. Remember that the markets overall and stocks in particular can only do 3 things. They can only go up, down or sideways. Have rules and strategies in place to take advantage of each trend. Take control of your financial future and learn how to trade your account for yourself. Remember, your thoughts determine your results. You must trade with confidence. You must trust your strategies. Banish all emotional responses, especially those of fear and doubt. You must have the mindset that you believe in yourself and that you have the confidence to achieve your goals. Having a clear plan and using rules based strategies will give you an edge no matter what the markets are doing.
See you out there…
Richard Rosenthal
Kaizentrader
