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6,358 posts
msg #70108
Ignore TheRumpledOne
12/29/2008 10:55:32 AM

In my Inbox today:

10 New Year's Resolutions for Every Stock Trader Perspectives for the week ending December 28, 2008

A belated Merry Christmas to everyone and best wishes for 2009!

1. I Will Remember Risk
Every time we make a trade, we must let the risk of the trade determine how many shares we take in the position. If we take more risk than we are comfortable with, we are more likely to make emotional mistakes that will cost us money.

2. I Will Remember Reward
A trade must have enough profit potential to justify the risk of the trade. As a general rule, a trade should have twice as much reward potential for the risk you take.

3. I Must Limit Losses
A big loss in your portfolio can outweigh the gains made on 10 other trades. Limit the size of your losses and stick to the limits. If a trade does not work out, take a small loss and move on.

4. I Must Not Limit Profits
While it feels good to lock in a profit, we should lock in our gains when the market tells us the stock is more likely to go lower than higher. Let profits run until then.

5. I Need to Keep it Simple
In the search for trading success, many traders get very complex in their analysis. Good traders keep it simple, and focus on doing the simple things right.

6. I Will Remember that Public Information is Useless Information
If information is known by the general public, then it is priced in to the stock. The stock market moves on what will happen in the future, not on what has already happened.

7. I Will Focus on Abnormal Behavior
The stock market is efficient most of the time. That means that you can not expect to consistently beat the stock market unless you focus on opportunities where the efficiency of the market is breaking down. That tends to happen when stocks are behaving abnormally.

8. I Will Trade With Confidence
So much of trading success is mental. To make money, you have to believe in what you are doing and execute your trading plan. Start slowly and build up your confidence before you take too much risk.

9. I Will Learn Before I Trade
Most stock traders lose money because most stock traders don't take the time to learn how to trade. Tools are only useful if you know how to use them.

10. I Will Not Try to be an Overnight Success
If you aspire to make money from the market, realize that the process to learn how to trade will take time. Getting rich quick from the stock market is no more likely than attaining wealth by playing blackjack. Good traders don't gamble.

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