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Stock Market Game - Some Rules
It is said "No Game Should Be Played Without Rules" Life is a game and so is Stock Markets, if you participate in the buying and selling in stock market, you are playing a game - its your wish and fancy to call it by whatever name you like e.g Trading, Investing, Retirement Planning etc. however at the end you are playing a game so you must have some rules.
Its been decades I have seen this game, Yes I was a kid then however the kind of Greed, Fear, Hope and Despair I have seen on the faces of my parents and grand parents was enough to instill some basic knowledge in me. I am trying to share some of the rules I have made for myself before I press the Buy or Sell button or call up my broker to execute a deal.
1. Never fall in love with a company - Even the promoters of the company don't love their company - Don't take it otherwise, this is the bare truth, if a stock is delisted from the exchanges you as the common share holder lose your money as in case of liquidation you stand last in the queue of the creditors.
2. Never take home any day trading positions home - Day trading means day trading that position has to be squared off on the same day no matter what is the outcome. 99% of the losses have occurs because it was bought for day trading and was taken home.
3. Never overleverage yourself - Never build a position on brokers money beyond your capability and willingness to pay.
4. Have clear exit plan before you enter trade - Another reason for major losses is no defined exit plan, decisions, tips, calculations, advices Do go wrong and they will continue to go wrong many times, have a clear cut exit plan just in case the trade turns against you.
5. Chase the momentum Not the price - Find out the difference between sudden price spurts and sustained momentum, if anything just spikes up and then settle down lower better leave it.
6. Understand the risk - Be prepared to take a loss, this is part of the game, holding on to a losing position that too on broker's money is never a good idea..
7. Book partial profits at times - It is always a good idea to have some liquidity on your side, so you broker does not cuts your positions at the bottom.
8. Take the market as it comes - Markets have been there before most of us and will be there after us, take trading as serious money making business, if you want fun and excitement try a Night Club.
9. Be fearful but never panic - If your position is in loss calculate the risk, look for next level of support or resistance, "The urge to buy at resistance and Sell at support is maximum" drink a glass of water or take a walk before you press the panic button.
10. Never overtrade - If you have got the substantial profits, call it a day, enjoy the rest of the day may be the next trade you enter may not be rewarding, maximum wrong decisions are taken in the moment of joy ( those married know what I mean LOL ).
11. Hire an analyst - It is okay to pay a small sum of money to a professional for the right advice than to trade blindly.
12. Get some tool - Don't forget in financial markets you are competing against or with the greatest minds and resources of the world and since someone else's loss is your profit, the reverse is also true your losses are someone else's profits and believe me everyone else in the market is after your money.
This list is by no means complete however if you have taken anyone of this seriously, your profitable trades would increase, whatever is written is based on 1st hand experience in the front of terminal.
-- by Rohit ---
** note
This valuable document was among my collection papers and thought of sharing with you. - Prince
It is said "No Game Should Be Played Without Rules" Life is a game and so is Stock Markets, if you participate in the buying and selling in stock market, you are playing a game - its your wish and fancy to call it by whatever name you like e.g Trading, Investing, Retirement Planning etc. however at the end you are playing a game so you must have some rules.
Its been decades I have seen this game, Yes I was a kid then however the kind of Greed, Fear, Hope and Despair I have seen on the faces of my parents and grand parents was enough to instill some basic knowledge in me. I am trying to share some of the rules I have made for myself before I press the Buy or Sell button or call up my broker to execute a deal.
1. Never fall in love with a company - Even the promoters of the company don't love their company - Don't take it otherwise, this is the bare truth, if a stock is delisted from the exchanges you as the common share holder lose your money as in case of liquidation you stand last in the queue of the creditors.
2. Never take home any day trading positions home - Day trading means day trading that position has to be squared off on the same day no matter what is the outcome. 99% of the losses have occurs because it was bought for day trading and was taken home.
3. Never overleverage yourself - Never build a position on brokers money beyond your capability and willingness to pay.
4. Have clear exit plan before you enter trade - Another reason for major losses is no defined exit plan, decisions, tips, calculations, advices Do go wrong and they will continue to go wrong many times, have a clear cut exit plan just in case the trade turns against you.
5. Chase the momentum Not the price - Find out the difference between sudden price spurts and sustained momentum, if anything just spikes up and then settle down lower better leave it.
6. Understand the risk - Be prepared to take a loss, this is part of the game, holding on to a losing position that too on broker's money is never a good idea..
7. Book partial profits at times - It is always a good idea to have some liquidity on your side, so you broker does not cuts your positions at the bottom.
8. Take the market as it comes - Markets have been there before most of us and will be there after us, take trading as serious money making business, if you want fun and excitement try a Night Club.
9. Be fearful but never panic - If your position is in loss calculate the risk, look for next level of support or resistance, "The urge to buy at resistance and Sell at support is maximum" drink a glass of water or take a walk before you press the panic button.
10. Never overtrade - If you have got the substantial profits, call it a day, enjoy the rest of the day may be the next trade you enter may not be rewarding, maximum wrong decisions are taken in the moment of joy ( those married know what I mean LOL ).
11. Hire an analyst - It is okay to pay a small sum of money to a professional for the right advice than to trade blindly.
12. Get some tool - Don't forget in financial markets you are competing against or with the greatest minds and resources of the world and since someone else's loss is your profit, the reverse is also true your losses are someone else's profits and believe me everyone else in the market is after your money.
This list is by no means complete however if you have taken anyone of this seriously, your profitable trades would increase, whatever is written is based on 1st hand experience in the front of terminal.
-- by Rohit ---
** note
This valuable document was among my collection papers and thought of sharing with you. - Prince
