There are many strategies everyone can use as a tool to participate in the market. You can be a long-term value investor by using the analyzing technique to determine the financial statement of a company and buy a stock below its intrinsic value and keep holding for their raising value appreciation. You can be a swing trader who buys and holds stock of your favorite companies in a short period of time, maybe 2 or 3 weeks, and sell it for a better price value. You can be a day trader who uses the technical analysis (Chart) to buy and sell stock within an open and close session of the market. There are many other techniques such as short, options, etc. In this post, we are going to list 8 powerful stock trading lessons that you should follow when you are in the market.
1. Successful trading is an emotional battle
Managing a 5-figure account is vastly different from a 7-figure account.
If you are down 20% on a $1m account, that could be the cost of a new house or multiple cars.
That’s a voice you must overcome each day.
2. Stocks are never too high to buy
Research has shown that strong performing stocks over the last 6 to 12months are likely to outperform the market over the next 6 to 12months. In other words, buy high and sell higher.
3. Be prepared to take a loss
It sucks when your stock hits your stop loss. But it's worst when your stock collapse lowers with no end in sight.
4. Trade your own method
It doesn't matter what Warren Buffet is buying.
It doesn't matter what Paul Tudor Jones is trading.
It doesn't matter what the news is saying.
Ultimately, you must develop your method to trade the markets. Don't be a sheep or you'll get slaughtered.
5. Don't try to play the market all the time
No markets trend all the time.
No markets range all the time.
No trading strategy works all the time.
Thus, you must know when to stay in the markets and when to stay out.
6. Trade along the path of least resistance
If the price is heading higher, look for buying opportunities.
If the price is heading lower, look for selling opportunities.
If in doubt, stay out.
7. Markets are never wrong, but opinions often are
Never trust anything.
Always verify everything.
It’s your money and nobody cares for it more than you.
8. Respect risk
Jesse Livermore took huge risks to make millions.
He has the skill and the luck.
Unfortunately, his luck ran out.
This cost him his money, marriage, and eventually, his life.