Bankroll Management

  1. Never use margin when you're trading unless you are 110% confident in the direction of your trade.  A 50% loss requires a 100% gain to make back.
  2. Never invest more than you can lose.
  3. Never take a position that is larger than 25% of your account size.  If you fail, you have room to play other stocks and add / subtract from your position.  This allows you to focus on opportunity costs.
  4. Size smaller on thinly traded stocks as they require a looser stop loss.  A looser stop loss equivocates to higher risk.
  5. When sizing larger, compromise by having a tighter stop, allowing you to still keep your risk under control.  With this in mind, your entry must be timed well.

Trading Psychology

  1. Don't always follow the herd, you'll be the last sheep that squeezes through the door late.
  2. Don't always follow the advice of other traders, even those with great track records.  For the most part, you won't be able to get their price, putting you at an inferior to them in any situation.  Always look to better your own trades but take ideas that are still profitable from others.
  3. There is too much opportunity cost for you to fall in love and focus on one stock.  Never hold the bag.  
  4. Do DD before you go into a trade, your money is valuable and the more time you spend looking for a place for it to be, the better of a place you will find.
  5. Always take profit.  Don't reenter a chase if it goes higher, hit it and quit it.  There are more plays in the market, and an emotional chase is the last thing you want.
  6. Trading is a game that requires optimal decision making skills.  If you are emotionally effected by a loss, or a large unrealized loss - take a step back and refocus.  Trading on tilt will only make things worse.

Entries and Exits

  1. Never chase a stock that is at the top of it's trend.  Watch for oversold indicators and an exhaustion of momentum on level 2 and AVOID an entry.
  2. Set a tight stop when attempting to catch a stock you are expecting to reach LOD.  Failed bounces can make for dangerously new lows.
  3. Go for high success rate plays like multi-day BO on high volume.  These are "chase-able" momentum plays.
  4. When entering, know the amount of shares that you are going to buy in accordance with your stop loss.  This will allow you to know the maximum $ amount you can lose on one trade.
  5. Use limit buys off of the bid when there are high spreads.
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