Part II
CAPITAL:
Always trade with enough capital. We dont live in a dream world.
If you dont have enough to trade in the market, don't borrow and
leveridge yourself by borrowing on margin. Margin Trading are
excellent for 'Bull Market' trading only. Otherwise I might as well
hand you a shoval to dig your own grave.
Trade to profit for meaningful Gains:
It is no point to trade for a 20% gain from a $1,000 investment when
the amount is not going to be enough to sustain your livelihood.
You should calculate first what you need for your livelihood and add
a little more for savings. This amount should be a percentage of
your initial investment that you should profit from the market.
Let me show from an example:
If you require $5,000.00 a month for your monthly expenses and savings,
and you are looking to profit 10% a month in trading from your investment,
then your monthly investment should be $50,000.00 (10% of $50,000 is
$5,000). But you should remember that you may not be successful
every month in trading. Thus I would recommend an amount more than
the $50,000 in your portfolio, maybe $75,000 or $100,000 as your
initial investment. Your profit target in trading all depends on your
monthly or yearly requirements.
Keep a safe stop loss rule in trading. Most Professional Traders keep
a 2% to 3 % rule of their investment portfolio as a stop loss level.
Example: If your stop loss rule is 2% of your capital ($100,000), and
you have invested $10,000 in stock X and your trading call is wrong.
Your loss is $2,000 which is 2 % of your $100,000 trading capital,
then you should take your loss and sell stock X .
Always measure the RISK versus Reward before making the trade off.
Don't let your short term emotions overcome your trading strategy.
If you are stopped out, it is a system stop loss.
Dont trade to score as many winners as possible rather
TRADE TO MAXIMISE AS MUCH AS POSSIBLE ON EACH TRADE.
Patience is important not only in waiting for the right trade, but
also in staying with the trades that are working.
Dont worry about looking stupid if you have traded in the wrong
direction.
Never listen to other opinions. Make your own decisions and plan
your own setups.
A final note: One might say that it is his or her bad luck or
"KARMA" that good luck seems to fail on them.
With proper planning and good money management and a little
prayer sometimes helps.
The Lord may not be there when you need him most
But he will be there on time.
( I consider the statements highlighted in green as VERY IMPORTANT )