How To Trade Stocks - Stock Trading Advice

The number 1 rule for stock trading is to actually become a trader. This may seem a slightly funny sentence to write, but most of the people who dabble in the market aren't traders. They're gamblers.

The difference between a gambler and a trader is simple: A gambler leaves everything to chance. A trader makes decision when the conditions offer him a high probability of success. This means that the trader bases his decisions on sound information and solid methods.

Before you put one dollar into the stock market you need to step back and ask yourself: am I a trader or a gambler?

Don't answer right away because being a trader is more than just reading the financial pages. It involves following the guidelines I lay out in the rest of this page.

Before you begin trading you must have a method which tells you with a high degree of probability when to get into a position.

And this method needs to be reliable, easy to use, and based on the data, not on emotions.

If you don't know when to get into a stock then don't. Learn how to do so.

The first step is being able to identify entry points. Do that, and you're halfway to earning a ton of money.

Again, following the general recommendation of this or that stock expert isn't enough. You must be able to identify a specific entry point before trading.

Even the best traders lose money. This is why you have to place stop loss prices. A Stop Loss protects you against too big losses.

This is something which will happen because no trading method is foolproof. You're playing the probability game here. If you allow one bad trade to plummet, it can take 10 winning trades to even the score.

Losing is part of the game, but make the losses small, and you'll win big in the long run.

However, if you have a reliable stock trading method, you will mostly see money pouring in. You need to secure winnings as fast as you can so you win more than you lose.

This means that you set incremental take profit points and start taking the profits chunk by chunk.

Let's say you places $10,000 in a certain stock and it jumped by 5%. Maybe you take out a quarter of your trade and bring the Stop Loss price to the price in which you entered the trade. What this means is that you've virtually secured your earnings.

If the stock goes up another 10%, you take out another quarter and bring the Stop Loss price up again.

In this way, you're not just protecting against losses, you're securing your winnings which is equally important.

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Knowing how to trade stocks isn't just about choosing the right one at the right time. It's also about knowing how to exit a position at any given time.

Before I learned this, I used to get into a stock, watch it go up 20%, didn't know what to do with it, hoped it would go up more, but finally watched it go down 35% and wound up with a loss.

My advice to you is never to enter a trade without knowing how to get out of it.

Knowing when to enter the market and when to get out is excellent and a thing you must have a complete control of before you begin.

However, knowing how much to trade is also vitally important.

This is known as money management, and if you're not doing that than you really should.

Let's take an example and see what happens if you don't know how to manage your money.

You win 2 trades by 5% and lose just 1 by 2.5%. Sounds good, right?

It depends. Let's say your winning trades had $5000 in them each, but your losing trade had $20,000 in it.

You won 5% on 2 trades of $5000 each and earned a total of $500. But, you lost 2.5% on $20,000 and lost $500.

You have a good probability of winning trades but nothing to show for it.

Of course, managing your money is more than this one small example, but it can still tell you a whole lot, and show you the vast importance of knowing how much to trade and just when.

You should never trade by anything other than your method.

There are 2 kinds of traders: those who trade with their brain and those who trade with their stomach.

Decide which one you want to be.

If you trade with your stomach, you're nothing but a gambler who plays hunches. You will likely lose a lot of money.

If you work with your brain, you can increase the probability of winning and earn a lot of money in the long run.

Also, you trade by the method which means that if you see a trade go down a bit, you change nothing. You stifle your emotions and remember that you placed a Stop Loss to protect you.

The trading method you follow is the golden rule by which you act. Nothing else.

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Another important rule is to not trade according to analyst's recommendations or the news. Trade only by a method which controls the elements you need to succeed:

• Knowing when to get it


• Placing Stop losses and Take Profit prices


• Knowing when to get out


• Knowing how much to trade

When you trade by the recommendation of an analyst, you may know which stock to choose but never when to get in, where to place Stop Loss and Take Profit prices, when to get out, or how much to trade.

This means that you're trading more than half blindly.

Do it, and you will lose money in the long run.

Always trade by a complete method.

Trading isn't the only thing in your life, so you need to make sure you don't waste too much time on it.

Knowing how to trade well with little time is a skill you need to adopt and your trading method should be one which you can employ fast and easily.

If not, then what's the use of trading? It's going to be like a second job while it should help you make a better life for yourself.

Also, spending too much time monitoring the market leads to emotional strain. Remember, once you place the trade you have Stop Loss and Take Profit prices to work for you and finish up the trade when the time is right.

Even when traders follow a method, they tend to make trades on instinct.

This happens when you hear a news item or read an article about a certain stock or option and think to yourself: "This is a sure winner".

You rush to make the trade without running it through the trading method you use.

This is bad trading strategy if I ever saw one. As I said, always trade according to the criteria of the method you're using.

Never ever trade when you shouldn't.

Stcok Trading success comes from trading with a solid method. This doesn't mean that it will win on every single trade, only that it will make it profitable in the long run.

Also, invest in your trading education. This is vitally important. The Stock Market can help you make many thousands of dollars over and over again. But only if you know what you're doing.

To make sure that you do, you need to educate yourself, take some stock trading courses, and always learn more.

It's an investment in your future and financial situation, and it'll bring you more money than you ever spend on education as long as it's a good one.

Then, when you know what to do, simply apply it over and over again to get long lasting results which will make you more money.

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