1) Lower your position size until you show a track record of good performance. It is better to lose small so your can eventually win big.
2) Always look for favorable conditions to trade from or stay out of the market until they appear. Bad executions will ruin a perfect chart setup.
3) Watch the stock before you enter. Look for evidence to confirm your decision. The volume and trend must support the reversal, breakout or fade you're expecting to happen.
4) Decide how long you want to be in the market before you execute the trade. Don't day trade a stock you want to invest in or invest in a stock that was supposed to be a swing trade. Don't swing trade a stock that was supposed to be a day trade. You are supposed to be using different accounts for different trading objectives. If you mix these trades up then you'll just have more than one account doing the same thing. There is no point in this.
5) Take positions on the side of momentum, not against it. It's less dangerous to be on a speeding freight train then to jump out in front of one.
6) Avoid trading at the open. There are too many fades, reversals, gaps, news and other things that will likely dramatically affect stock prices in the first ten minutes. Let the market settle down first after the market makers and specialist have fleeced the amateurs. Only then is it time to trade. Let the market show its hand before you trade it.
7) Avoid pre-market trading unless there is an absolute must own stock that you missed the day before and you found in your scans after the market closed. If I find a stock like this in my scans the night before, I may buy it in pre-market. Other than that situation, Pre-market trading is too difficult due to the spreads, illiquidity and the fact that you are hampered by the dreaded limit order and the inability to execute a stop order.
8) Stay away from the reactions of the crowd. Their emotions often signal opportunity in the opposite direction. Profit rarely follows the masses. Step aside when confusion is in the air and the market or herd lacks direction.
9) It is okay to take overnight positions. Buy at the close and hold until the next day's trading session. As long as your disciplined enough to maintain a proper positions size. By holding overnight, you can take advantage of selling the gap up for profit at the open. Of course, there is always risk the stock will gap down. Holding over night is risky but there is also the potential for big rewards.
10) Trade with a strategy of entering new trades at support and exiting them at resistance in a range-bound market. Trade with a momentum strategy of buying breakouts at new highs or selling short at new lows in a trending market.
11) The entry is the key to success. An excellent entry on a mediocre chart makes more money than a bad entry on an excellent chart.
12) Follow the our indicator panel. Our BBI and MSL indicators have been on the money during this latest market slide. If you are following them, you should be either 100% cash or shorting the market. If you are in cash as these indicators have advised, you have preserved all your prior gains. If you are short the market based on these indicators, you are making a healthy profit as the market goes down. Do not underestimate the value of this indicator panel.
David Colletti
Founder
StockTradersHQ.com
The Headquarters for Serious Traders.
Copyright 2008 StockTradersHQ.com
This article is courtesy of David Colletti, a ten year veteran stock trader and founder of StockTradershq.com. Our staff of professional technical traders analyze 1,000's of potential stocks every day to provide you with a list of stock recommendations nightly with the greatest potential for explosive gains. These stock picks are traded with our real-time portfolio. Email alerts are sent to members for every entry and exit. Our subscription service provides all the resources, stock picks and tools an investor needs to make very profitable, consistent trades while maximizing gains and minimizing losses. StockTradersHQ.com offers a 21 day free trial with full member access.
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