Stock Trading - Anyone Can Do It

By: Chris Jones
That's right I said anyone. Yes, even you. You don't have to be highly educated, you just have to educate yourself in the right things. I believe that if you have the will and desire you can do it. The biggest mistake that people make, is they jump into trading without knowing what they are doing. The market is licking it's chops, just waiting for these poor souls to buy at the end of a rally, or sell at bottom of a downtrend. Yep, they end up buying when they should be selling and selling when they should be buying.

Why? Because they just don't understand the market, and they let their emotions rule their trading. They need a trading plan and a good set of trading rules. Some traders have a good plan and set of rules, but greed and fear enter the picture, and before they know it they're in a losing trade. They think that if they hold on just a little longer, things will turn around and their losing trade will become a winner. Does this sound familiar? If you've been trading very long it probably does. If you are new to the market, then learn from those of us who have made these mistakes. Proverbs 9:9 says Give instruction to a wise man, and he will be yet wiser: teach a just man, and he will increase in learning.

If you don't take to heart what I'm saying you will have to learn from your own mistakes, or you will get frustrated and just give up.

Trading is not rocket science. Shoot, a poor trading plan with the right rules can be very profitable. Now, I'm not saying that you don't need a good trading plan. What I am saying is that if you abide by a sound set of rules, and don't deviate from them, you can be successful. Even the best traders have bad trades. But, they know how to cut their losses and make the most of their winners.

You have to pick a trading plan that is right for you. Once you have your plan, its time to write down your rules. Here are a few you might consider.

1. Maximize your profits, not the number of trades.

2. Don't risk more than 5% of your capital.

3. Be patient and wait for the best trades.

4. Be patient, and don't close a profitable position too early.

5. Don't be married to your first opinion about a trade. If the trade turns bad, get out! Don't wait! Move on to the next trade!

6. Know when your going to sell before you enter a trade.

7. Don't hold on to a losing trade. Cut your losses early, and protect your profits with trailing stops.

8. Buy at support, sell at resistance. So many people are watching support and resistance that it effects price movement.

9. Don't buy up into a major moving average or sell down into one.

10. Exhaustion gaps get filled. Breakaway and continuation gaps don't.

11. The trend is your friend. Don't trade against it.

12. Don't trade at the open. Wise traders wait before entering the market.

13. Beat the crowd in and out of a trade. Take their money before they take yours.

14. Never add to a losing position!

15. Sell markets that show the most weakness; buy markets that show the most strength.

16. Do more of what is working and do less of what is not.

17. Trade active stocks, avoid thinly traded stocks.

OK, now you might think that all you have to do is have a trading plan and a set of rules, and you'll be ready to make your millions. Wrong! I have two more things that you should do. First, before you put your own money at risk, you should paper trade. You should be able to trade profitably on paper before you even think about trading with your hard earned money. Second, continue your stock trading education. The more you learn the better you'll trade.

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