Even though 2014 has just begun, so far it has been difficult and frustrating for most investors and traders. One only has to look Apple's (NASDAQ:AAPL) recent performance as a prime example of how 2014 is going to be a very different year from 2013.
Today, I want to share with my "10 Golden Rules of Trading" that never go out of style. Why? These rules are the universal truths of the marketplace. To ignore them you could be condemning your portfolio to failure.
While I did not invent all of these rules myself, I did discover them the hard way. My discovery was painful, expensive, and brutal as I made practically every mistake in the book, before finding success in the markets.
Incorporating these "10 Golden Rules of Trading" into your own strategy can help you down the path to success in the markets.
1) Have a Game Plan - Figure out why you’re getting into the market and, more importantly, how to get out if you’re wrong.
2) Follow the Game Plan - It’s amazing how many people create a game plan, but do something completely different in the emotion of the moment. The game plan grounds you and keeps you on track with what you want to do.
3) Use Stop-Loss - Placing a stop-loss order is another way to stop emotional decisions and prevent losses from mounting. A stop-loss gives you important protection for your capital.
4) Reduce Your Risk – Diversification is an easy way to reduce your risk level when trading. A diverse portfolio might include markets from completely different sectors. These markets are not correlated and therefore their success or failure are completely independent of one another.
5) Filter Your Trades – It’s important to determine a set of criteria you can use to narrow down which markets will make good trades. MarketClub offers tools to help you do this, but you can do it yourself easily if you try. A filtering technique will help you avoid the small whipsaw trades that can eat up your capital and allow you to capture the big moves.
6) Trade With The Trend - If the trend is going up, trade on the long side. If the trade is going down, then trade on the short side. Trading with the trend will put the odds in your favor.
7) Do Not Listen to the News - Many stories are planted by traders to affect the market. Within half an hour the news will be gone and the market will be doing something else, it’s just that simple.
8) Do Not Listen to Your Broker - Your broker has a vested interest in putting money in his pocket and not yours. There is a conflict of interest there, so do your homework and make your own trades.
9) Money Management - You really have to be good at managing your capital. This refers back to what I said before with diversity, stop-losses, and profit objective. All of these come under money management, which is a very important part of trading.
10) Disciplined Trading – To me, discipline is the key element to successful trading. I’ve made this the last rule because this is the one I really want you to listen to and remember. Being disciplined is following your stops, your game plan, and taking your profits when they hit an objective.
I hope that my "10 Golden Rules of Trading" help you and put you on the right track in the New Year.
Wishing you every success in trading and in life,