Shares & Stocks Trading Tips
Have a Plan
- Successful traders use a strategy that works for their temperament and account size. Before trading with real money, the beginning trader should pick a trading strategy and practice trading using the strategy, to verify that it will generate the desired level of profits. You strategy should include the selection criteria for stocks to trade, entry and exit points and the size of each trade.
Keep a Journal
- All traders should keep a written journal of their trades. The journal should include the entry and exit prices, why the trade was entered and whether is was profitable or a loser. Also use the journal to write down your thoughts and feelings about your trading each day. Successful stock trading is a mental game, and the journal will help you monitor your mental state.
Cut Your Losers Short
- Traders cannot afford to absorb big losses. According to the SEC, most day traders suffer significant losses when they start trading, and can lose all of their trading capital. Successful traders will not let a losing trade run. Set a tight stop-loss point and close the trade if the stock falls to that point. A trader who controls her losses can profit at trading with just a 50/50 split between winning trades and losers by keeping the amount lost to a minimum.
- Trading requires mental toughness. The trader cannot be emotional about trades or the market. Stock trading is a high pressure activity and the trader must know how he will react under the pressure. The trader's plan and activities should conform to his psychological makeup. Some traders are better with aggressive trades that can result in very large gains and losses. Others want to make a few dollars each on a lot of trades while limiting the chance of a loss. A useful exercise before developing a trading plan is to take personality tests to determine your trading strengths and weaknesses.