The 10 Commandments of a Successful Stock Market Trader.

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  1. Play Quality Setups Only.
  2. Don’t chase at market open.
  3. Cut your losses quickly when you’re wrong.
  4. Go for base hits, not home runs.
  5. Don’t overtrade.
  6. Trade only when there’s volume and liquidity.
  7. Don’t FOMO into other people’s trades and ideas.
  8. It’s ok to be wrong.
  9. Do your best to control your emotions.
  10. Never give up.
  11. Experts - Financial Markets and Analysis - DDIChat

Play Quality Setups Only.

Know the difference between good, pretty good and excellent. In the clear bull market, it’s much easier to get good setups. Don’t take trades that don’t meet your criteria. In bear markets, even excellent setups can be destroyed but at least, you’re giving yourself a high probability of a winning trade.

Don’t chase at market open.

They say that the first hour of the market is a ‘’retail’’ hour. More often than not, you’ll get burned when taking the trade at the open or soon after. Wait patiently to see if the price trend continues intraday. Wall Street boys like to buy during the last, so called ‘’power’’ hour, which many times significantly increases a probability of a market uptrend continuation.

Cut your losses quickly when you’re wrong.

It is inevitable to lose. You cannot control the market, even the best setups can be destroyed if the trend is not sustained or there’s a black swan event. It’s ok, it’s part of the game. Control your risk and your trading decisions. Don’t get too attached to stocks. I know it’s counterintuitive to sell when you’re in the loss as your mind fights with the negative emotions it expects. Train yourself to overcome those feelings.

Go for base hits, not home runs.

Try to make consistent profits. It’s damn hard indeed in this choppy market we have lately but in such environment, you need to take profits quicker than you’d normally do. Small gains compound over time. Yes, it’s not spectacular in the beginning but as the time goes by, gains will grow exponentially. You’re not here to catch tops and bottoms perfectly but to make money.

Don’t overtrade.

Keep it cool. If you’re satisfied with your gains over multiple recent trades, don’t rush and jump in to another one straight away. Similarly, if you had multiple losing trades, don’t revenge-trade. It’s known as ‘’hot-hand fallacy’’, don’t fall for it. You don’t have to trade every single day.

Trade only when there’s volume and liquidity.

Be where the money is. Avoid stocks with less volume than 100k a day. As a small position in such stocks can fluctuate the price dramatically. Known as pump and dump scheme. Also, it will be hard to offload your shares if you need to.

Don’t FOMO into other people’s trades and ideas.

There are a lot of influencers out there on Twitter and Youtube pumping up stocks. First, never, ever take a trade like this if it’s not confirmed by your own trading system or fits your style. First, you don’t know the exact time of entry but worse, you don’t know when they actually take profits and why. It’s ok to get some initial inspiration or check out somebody’s due diligence and analyze if it is indeed worth your closer attention. Second, influencer channels that are ultra popular are closely watched by two sides of the market. It’s quite common that their picks can be heavily shorted by the funds just because they know a lot of ‘’retail’’ investors will jump in. Funds and their algos can kick you out of your stop loss levels easily. Sure, sometimes a heavy short-squeeze can be very lucrative but statistically, the odds are against you. If you really want to give it a go, at least play it with a relatively small percentage of your account and size up accordingly as the situation develops.

It’s ok to be wrong.

We’ve said it already but it’s important to keep this in mind at all times and not get discouraged. Did you know that a famous, one of the best funds out there — Renaissance that develops complex AI algorithms to trade, consistently outperforms the market over last few decades, is right in just 51% of trades? It’s enough to make billions and billions of dollars every year. They even stopped taking outside investors money more than a decade ago just so they don’t grow too large to decrease their performance.

Do your best to control your emotions.

Don’t let your trading decision and outcomes reflect who you are as a person or how you treat others. Every trader is guilty of being harsh on people around us just because the trade we took went bad. The more emotionless you’ll be around trading, the better position you have for future success. It’s especially critical to master this skill, before your start playing with a larger account as the stake will be higher. But emotions should be controlled exactly the same as with a few hundred bucks account.

Never give up.

Be tenacious. No matter how many times you lose, don’t give up. But only if you learn from your mistakes. I know it’s vague to say but this approach will make a big difference in your path to success. Accept that losing is a foundation of a successful trader. Also, no matter how big your account will grow, there’s always room for improvement.

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