Four Simple Rules For Trading Stocks
Q: I now give you the wisdom of my trading experience: I know these have been written a thousand times but, damn it, I've learned the hard way that these four things are absolutely critical to do BEFORE entering a business:
A:
1) Set price target (and exit if reached no matter how much you're
convinced by then that there is a much larger gain to be had).
2) Set stop-loss price (and stick to it no matter how much you're
convinced it's gonna rebound, you don't have to actually use a stop-loss
order as long as you constantly watch it and can trust yourself to
3) Set holding time period (and exit if reached, you won't have much loss
if you stuck to rule #2, if you don't follow this rule you will find
yourself sitting on dead money indefinitely).
4) Determine how you're going to handle it when your position drops down
20% (by rule #2 you're obligated to exit, but dammit, when it actually
happens to you, if you're not already mentally prepared to deal with it,
you'll sit there like a deer in headlights while it drops another 20%).
And as an added bonus, there's this rule: If you have good gains on a
position, but it rolls over before hitting your target, reset your stop-
loss to breakeven (or better), in other words: don't turn a gain into a
loss!
Trading the NYSE these days has to be long only, seems to be decided
that no downward action of any type will
be tolerated, so don't fight tapes, go long.
Big brokers have sold a shitload of options on a big market move, so
expect no action for expirey.