Originally Posted by
blackjack21trader
Rule 1: When it is cheap, it is cheap for a reason.
A stock price reflects the health of the company. Buying stock is not like shopping, you don't go for bargains. You go for healthy company.
Rule 2: Do not be afraid to take losses.
It is better to stop and take some losses rather than wait for a tumbling stock to recover. Usually, a dropping stock will drop further!
Rule 3: Never fall in love with any investment or stock.
You don't fall in love with something inanimate.
Rule 4: Use your head, not your heart.
If when you buy a stock, it drops. And when you sell, it risies. Then you have been trading with your heart and not your brain. Read those financial statements again, don't be lazy!
Rule 5: Don't average down !
To average down is to walk into a trap. It is wiser to average up.
Rule 6: Let the gains run, but stop the losses.
When you are winning on a trade, let it runs until your profit objective is achieved. But when you are on a losing trade, better take some monies off the table.
Rule 7: If you can't sleep over a pick, most probably it is a bad pick.
You have overlooked something. Your instinct is sending some signals to your brain. Review your stock pick.
Rule 8: Don't show hand ! ( Meaning: dump all you have into a single investment )
Because you will be at the mercy of one investment. If this fails, it is game over for you. However, if you keep some bullets, you can shoot like Rambo later again .
Rule 9: Listen only to analysts that have a single-sided opinion. Shun those who give you 2-sided advice.
Analyst who cannot give you a straight forward one sided view usually don't know what they are talking about or are just plain cowards . In investment, you always seek opinions which are presented one sided .You decide on the opinions later whether they are right or wrong on your own. They are the presenters, you are the decision maker. So, it is hardly useful when an analyst tells you “ The economy may recover in the next quarter, but it may not also due to...etc etc.” Come on, ANALYSTS ARE NOT POLITICIANS, YOU DON'T NEED A DIPLOMATIC ANALYST! An inconclusive analysis will only cripple and confuse your mind.
Rule 10: Discipline Vs Setting Targets.
Normally, in trading stocks, a human will not execute his orders even when the price targets are met many times. He will just watch them as his profits disappear or his losses escalate as if enjoying it. In trading, setting targets is very important and you have to be discipline enough to execute your orders when your targets are reached. It is important to be discipline in this because for a private trader, your are actually trading against a market of automated trading systems. Basically, the rule is to set a profit objective and a stop loss target. When your stock reaches the profit objective, execute it. And when it reaches your loss target, execute it. Be as emotionless as possible when you execute the trades. In reality, easier said than done but can be done!
Rule 11: Pick a winner, not a loser.
Rule 12: Your Due Diligence.
More to come.....
Disclaimers: Use the information on this page with discretion and due diligence. The investment principles presented here are very contrarian and based purely on personal trading experience. I am trained in business administration, I DO NOT have a finance,economic or stock trading degree. What works for me, may not work for you. I shall not be responsible for any loss or anything you do with any information on this site.