Sunday, March 25, 2012

Stock Trading Tips

The following tips are to help long term and short term investors create wealth and enjoy a healthy trading career:

Long term

1. Set out a plan and stick to it
2. Pick companies that you will enjoy following
3. Take some profits & let your winners ascend
4. Don't make too many adjustments to your account
5. Cut losses
6. Diversify by investing in utilities, IT, financials, health care and internationally
7. Enter the market at different times
8. Reinvest your dividends
9. When the market crashes have a contingency plan, don't panic, buy more stock
10. Consider passing your stock to your kids on a step-up in basis

Short term

1. Set stop losses
2. Accept being wrong and move on
3. Do not take trades personal
4. Do not try to make your money back with the same stock that took it
5. Do not double up to recover from a loss
6. If you have entered a losing streak take a break and stop trading for the day
7. Take profits when you have them
8. Occasionally take some of your gains to take a vacation or buy more education
9. Do not use all your money on one trade
10. Do not confuse luck with skill

When trading stock it is important to realize that the market is always right and a trader must stop a loss before it becomes out of control. Protecting money is a must to survive, too many bad trades and you won't live to trade another day.  If you have never traded before I recommend starting small and paper trading.  A day trader that wants to make money fast and exit a trade within minutes or hours wants a stock with at least 1-5 million in volume and daily avg movement of at least $1-$2.  A long term trader can buy just about any kind of stock but they may prefer those with high volume.

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