Acquiring a mastery and real know-how to earn trading stocks requires years of work and experience, which allows you to develop a feeling of the market.
Here are the mandatory rules that transform everyone into a better stock trader, provided these rules are understood and implemented.
1. Target the almost sure gains
No one can assure 100% sure day to day profit. You must take your time and be patient to build a fortune. Otherwise, the result may be disappointing.
Indeed, people looking to get rich quickly do not take precautions and bet on a small-cap, which leads them earlier towards disaster. The first rule to follow on the stock market is to take secure trades that unfold according to a pre-established plan.
2. You must have a trading plan
Therefore, planning each trade is essential, as it allows you to make informed decisions about when to enter and when to exit trades. The crucial thing is to avoid losing your money, and if the risk of loss is great, you better throw your hand away.
3. Too much diversification is not good
When an investor has a portfolio of many stocks, it would be difficult to follow each one and have enough time to do so. It would be impossible to ensure rigorous follow-up for more than eight actions in a short time frame.
Therefore, it is necessary to be responsive to market trends, especially if you are not a professional trader. For instance, you should opt for a maximum of eight short-term and 15 long-term most traded stocks to make quick and thoughtful decisions
4. Invest money only with all the chances on your side
Many people incur significant losses on the stock market by recklessly placing orders. Most often, they bet large amounts by anticipating changes in trend.
By opting for such a choice, they can succeed one in ten, but the other nine are doomed to lose. You have to build a position by only committing large sums once you are sure that all the indicators are favorable.
5. Making money by learning not to lose too much
Realizing profit on the stock market starts first and foremost with avoiding losing it. With time and experience, the investor begins to know the market’s pitfalls and avoid them in order not to lose the money.
Just remember that 80% of losses are associated with recurring mistakes you make. So you have to figure out what is not working and avoid doing it to focus on what is working and start generating profits.
6. Learning from mistakes
Each loss and each failure on the stock market is a lesson to learn, whether it is about how the market works, which securities to buy or not, the relevance of your investor analysis, etc. But you must avoid paying multiple times for the same lesson.
What could ruin your trading account is not the fifty mistakes that you have made but the one mistake that has been repeated about fifty times. Have in mind to keep a journal to be sure you don’t make the same mistake over and over.