3 FREE beginner video lessons.

6 Trading Rules to Follow

How I Determine Exits
June 6, 2016
Weekend Newsletter June 13th
June 13, 2016

Here are 6 of my personal trading rules that are an important part of successful trading….

 

1. Don’t hold through a catalyst.

Catalysts can be things such as earnings reports, litigation decisions, FDA appearances, etc.  Betting on how a stock will react to an earnings announcement is no better than betting on black or red at the roulette table- its gambling.  I personally use briefing.com for this, its a paid service. There are also free sites such as finance.yahoo.com for PR reports and earningswhispers.com for earnings dates.

 

2. Don’t chase.

If you miss the execution on an idea, wait for a pullback to enter. Chasing any stock too far in price is a serious mistake. Buying too far past the proper entry exposes you to greater risk and you are left with little cushion if the stock pulls back at all.

 

3. Make sure your plays have proper risk vs reward.

Risk is typically a break of any type of trend line support, while reward is pattern measurements. We want risk:reward to be better than 1 to 1. The $MEET example below shows a 3:1 risk reward, which is why I chose to alert it in my swing service.

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4. Trimming and trailing is a great way to manage positions.

This is a phrase that I attribute a lot of my trading success to. If a stock that you enter goes in a positive direction, it is always a good idea to take profits (trim) and then let the rest ride (trail) and use the uptrend support as your guide on selling the last piece. You won’t go broke taking profits!

 

5. Make sure you position size properly. Without question the most important area of trading is position sizing. Going too big in a trade can make a positive trade result in a loss almost every time. Poor position sizing is the reason behind almost every instance of account blowouts. Preservation of capital is an extremely important concept for those who want to stay in the trading game for a long time.

I go through all my tips and tricks on risk management and position sizing in my streaming course. ~only $649.

 

6. Don’t average down! Stick to your entries and stops and don’t get stubborn. You should always think about risk before reward and you should be more focused on risk per trade than you are on reward. Where your stop placement is located will help you determine the proper position size. Let the market show you that your trade is not valid by moving to a level that nullifies the setup.

As always, if you have questions on my trading rules or services, email info@traderstoolbox.net

 

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