1. Be humble
It is not important to be right all the time. It is not important to prove that you are right or wrong. Learn to accept that you do not know everything, that there are things outside of your control, and that being humble and open-minded is the most valuable position you can take. Nobody wants to be with a person who’s always right and has an answer for everything. The same applies for trading. You do not have to be right all the time, and it’s best if you don’t try to prove yourself. Being humble will help you learn more, learn faster, and make better decisions based on facts rather than emotional attachments.
2. Be skeptical
- Don’t believe everything you read or hear. Do your own work.
- Don’t assume that free advice from an “insider” is unbiased or objective; it almost certainly is not.
- Be skeptical of get rich quick schemes and promises of easy money. It is likely a scam based on the fact that trading isn’t easy money.
3. Be inquisitive
Be inquisitive. Question everything, including your own assumptions. Don’t assume that you know the answer, don’t assume that you know enough and most importantly, don’t assume others know what they’re doing.
Find out why something is happening – scan first, then make a decision. Consider all possibilities before making a decision. When someone tells you something, question it.
4. Be decisive
- Good decision: The market opens above the S1 level and you buy at open.
- Bad decision: You see EURJPY is in a downtrend, but you know it’s oversold and decide to go long anyway.
- Ways to make good decisions include meditation, eating healthy food, learning from your past mistakes
5. Be disciplined
I know this sounds a bit like your mom talking to you, but the best traders are disciplined. They trade with a system, they are patient and wait for the right opportunity, and they don’t risk more than they can afford to lose. Once you have a system in place, it’s important that you trust it. If you are going to take risks at all (which you should only do when the rewards are high), it is best if these risks are calculated ones. And if things go wrong, don’t get emotional or try to get revenge! Walk away and come back the next day with a clear head so that you can make rational decisions again
6. Don’t over trade
I’ve learned that overtrading is one of the most common reasons for traders to fail. Overtrading may be caused by fear and greed. The fear of missing a trade and the greed of wanting more profit from a winning trade are two of the main emotions responsible for overtrading.
Overtrading may also be caused by boredom, lack of discipline, and poor money management. If you do not have a trading plan or if your trading plan isn’t working properly, it could lead to poor results and some bad habits like overtrading. If you don’t change anything, soon you will fall into a routine where you spend all day looking at charts trying to find setups that aren’t there! Fear sets in when you start to lose money because you were overtrading and then bad habits develop as you try to compensate for the losses. Before long, burnout sets in and your motivation is gone.
7. Be careful about the information you read and the people that you listen to
- Don’t believe everything you read.
- Don’t believe everyone you talk to.
- Don’t believe everything you hear.
- Don’t believe everything you see.
- Don’t believe everything you think.
- And don’t believe in the first thing that pops up on Google when searching for “easy way to make millions of dollars trading stocks and options in 15 minutes a day!” Seriously, don’t fall for that stuff. Do your due diligence, educate yourself thoroughly, and proceed with caution as if it is your money on the line because it is!
8. Don’t fret about it
This is one of the most important lessons I learned in my first year of trading. You can’t control the markets, and there are always new opportunities. There is no sense in stressing over what you can’t control.
If you’re a frequent reader, you know that I’m a huge fan of keeping an extensive watchlist of stocks or ETFs that are setting up for a move on the long or short side. This approach allows me to capitalize on the setups that present themselves frequently and not get stuck on just one or two stocks.
When I started out, though, my approach was very different: I would pick one stock at a time and focus all of my attention on how it might act when it traded into my entry area (which was typically close to its highs). Inevitably, as soon as I established my position(s), the stock would break down and trade below where I entered. Then I would spend hours watching it like a hawk to see if it would come back up into my entry area so that I could exit without taking too much of a loss.
It didn’t take long for me to realize this pattern was not going to work out well for me in the long run—I wasn’t making money because I was holding onto bad trades too long while waiting for them to turn around (which they rarely did!), rather than focusing on potential trades with better risk/reward profiles from my watchlist
9. Know when to cut losses and go to cash
Knowing when to cut losses is one of the most important aspects of a trader’s success. It is better to take a loss than to let that loss become a disaster and wipe out your entire trading account. Keeping a trading journal will help you check your emotions at the door, which can be difficult to do in times of stress.
10. Watch interest rates and the Fed
The Fed’s monetary policy is something you want to pay attention to. It’s the things that they do with interest rates and their balance sheet, like quantitative easing and repo, that will affect the markets. You can tell how they’re going to change monetary policy by looking at what they say in their statements (the minutes).
11. Be a contrarian
There are a million people who want to tell you what stocks to buy and when to sell them. There are a million more who want to tell you they’ve uncovered the secret formula that will lead you to riches in the markets. But there’s only one way to achieve long-term success: it means being a contrarian, and doing things differently than everyone else.
Let me say it again: be different than everyone else! The road less traveled is usually the better one. It’s easy for investors, especially new ones, to get caught up in following what everyone is doing and buying or selling the same thing as everybody else. You’d be much better off not doing that — instead, do your own research, find good companies with strong fundamentals, and hold on for the long haul while other people panic at every blip up or down on their computer screens.
12. Diversify your portfolio
As a trader, you want to put yourself in the best possible position to make money. You wouldn’t want to put all of your eggs in one basket, so it’s important to diversify your portfolio.
A diverse portfolio has a mix of growth stocks and value stocks. It can also include a mix of stocks, bonds and other types of investments. The right balance will depend on how much risk you’re willing to take on and how conservatively you want to invest. Diversification reduces risk because if something happens that negatively affects one sector or asset class, it isn’t likely to hurt everything else as well.
These are some of my top tips for you if you’re interested in stock trading or investing
You need to avoid being too attached to the market. Do not fall in love with a stock. When you buy a stock, it should be bought for just one reason—to make money. If you are holding on to it because you love the company, find a different way of expressing your admiration for it.
In addition to detachment from the market, it is important that you remain even-keeled and unemotional when trading. The financial markets are not a place for feelings! Emotions like greed and fear can cause traders to lose control of themselves and make bad trades as they attempt to achieve their goals quickly or protect their accounts from losses at any cost. There is no reward without risk in trading; all serious traders will experience losing trades and periods, but this doesn’t necessarily mean they’re doing something wrong! Stay disciplined, avoid irrational exuberance in good times, monitor (and adjust) your risk tolerance constantly but don’t panic when things go south.
Finally, be open to learning new things as you continue down this path! Don’t be afraid to ask questions of more experienced traders or search online for answers when something confuses or intrigues you. The more knowledge you have about the markets, the better equipped you’ll be for success as a trader.