Rule 1. |
To trade successfully you must develop your own system and approach. To do this you must work the market out for yourself.The best way to start this process is to first learn how others before you mastered this task successfully. Thus become educated, informed and aware and stay that way. |
Rule 2. |
Never purchase equities at market price; always use a price limit. |
Rule 3. |
Upon entering a position a stop loss should immediately be put in place. Be prepared to cut your losses early should the price action go against you". |
Rule 4. |
As the price of the stock rises (or falls if you are short) raise your stop accordingly, thus allow your winners to run. |
Rule 5. |
Prior to investing in any equity pay particular attention to the risk reward ratio. The essence of the market is risk and for you to be profitable in the long run the risk must make sense in terms of probable and potential returns. |
Rule 6. |
Your potential portfolio of stocks chosen by fundamental analysis should comprise no more than 7/10 stocks. Know everything there is to know about your listing including price history, financials, business model, management and earnings dates. When you become experienced you can modify the degree of diversification in favour of focus. |
Rule 7. |
When starting out do not invest more than 10% of your investment fund until you have proven your ability to make good investment decisions in real time in the real market. Ideally you should paper-trade for 3-6 months before using real money. |
Rule 8. |
Keep a diary for note taking, analysis and review. |
Rule 9. |
The ideal time to trade is the last 1-2 hours of trading. |
Rule 10. |
Be consistent in your approach. Discipline will help you to eliminate emotion from the process and allow experience, logic and technique to prevail. |
Rule 11. |
Always know the trend of the market and your equities. The trend is definitely your friend and be aware that in a bull market, in the main, significant averages will be price supports whereas in a bear market the averages will be price resistances. |
| Rule 12. |
Be patient and learn to realise that if no investment prospect presents itself very often the best place to be is in cash since the most important trading rule of all is:
PROTECT YOUR CAPITAL. |
