Trading For a Living
If you are thinking about becoming a full-time stock trader to trade for a living, feeding
yourself and your family from your home investment office. Then you should be aware of some very basic rules to
reduce the risk of losing money and to maximize profits when buying and selling shares.
Trading stocks is not a get rich quick scheme, but it very well can be a get poor quick scheme if you don't pay
Basic trading rules are simple and obvious once someone tell them to you. With that in mind,
here are 10 great ones to follow:
- No one can predict the future so don't even try. Don't try to "time the market". Just learn how to read its
signals and let it keep heading in the direction it's heading in until something happens to turn it around.
Develop or buy into an existing stock trading system and stick with it.
- Big scores come from position sizing. Position sizing is the process of determining HOW MANY contracts to
trade when your system gets a signal. Position sizing is one of the most important and least understood
concepts with losing traders. The purpose of position sizing is to control risk, enhance returns and increase
robustness through market normalization. Position sizing can end up being more important than when you actually
buy or sell! Unfortunately, most systems and testing platforms seem to ignore it completely (or worse, apply it
- Everything is about price, price, price. Stocks do not follow fundamentals just because you want them to.
Prices change based upon the perceptions of the buyers and sellers.
- Don't take your advice from the big money management funds. They don't seek to outperform the stock market,
they seek to manage everyone's money as risk-free as possible and make a lot of money from fees. Pick stocks
based upon what YOU want as far as risk and performance is concerned.
- Don't depend upon technical analysis. Stocks trade based upon fear, greed, and perception. All of the
technical analysis in the world isn't going to help you if the market reacts to a company's product liability
lawsuit and the stock heads south. But, if your trading strategy says it's time to buy or sell, then it's time
to buy or sell.
- Question everything your read and everything you hear. Don't follow anyone, anywhere, as long as it's your
money that is at risk. Hot tips tend to become hot flops when it's all said and done. We live in a "pump and
dump" world, stay clear of rumors.
- If you have to ask you, then don't do the trade. If your system says "No", then it's no -- no matter how
good it looks. The whole reason to have treading rules is so you are not tempted to make decisions based upon
fear or greed. let your system guide you.
- Never respond to fear or greed. No one can beat the market every time. Make the rights moves in a bull and
bear market and you could see returns of 300%+.
- Make sure that you have the "right stuff" to be a full time trader. Don't trade with "scared money". Don't
trade blindly without a system. DOn't borrow money to trade. Have the guts to stay with your system even when
it seems to be going against you. If you keep loosing, stop trading and see what you are doing wrong. Chances
are you stopped following your system.
- There is more to life than trading the stock market. Get out, go for walks, spend time with your family.
Live, breathe, eat, swim, go to a movie. Your brain needs a break!
I wish that this were all you needed to know to trade a home full time. Unfortunately, it isn't. However,
nothing else that you learn, buy, or hear is going to do you much good if you don't know these 10 basic rules.
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