You should always get a game plan in place before making a trade. Getting caught on a emotional roller coaster is a sure way to end up penniless.
Points to Know:
- What is my maximum risk?
- What is my maximum reward?
- What is my break even point?
Make a plan:
- What is my entry point?
- What is my exit point . . .
- For taking profit or
- For stopping losses.
The most important part of your plan is to make a good plan and stick to it! Don’t let greed or fear over come you. It isn’t easy. I know. If you go outside the plan you will wish you hadn’t later. Remind yourself of that when the going gets tough. In the end you will thank your self, feel a sense of accomplishment, and control if you stick with it.
What are the attributes, qualities, or criteria for becoming a successful investor and trader? There is a famous quote from the book “Reminiscences of a Stock Operator” that says “Patience, Self-discipline, and mind-set of detachment” make a good trader. I am also reading a book called “Options Make Easy” it lists “patience, perseverance, knowledge, honesty, pre-planning, and discipline” as the criteria for successful investing. I will do a post on each.
Patience – Money and the thought of making large amounts of money causes people to become excited. When you are excited your judgment becomes flawed. Lean to be patience in your pursuit of wealth. I would liken it to a fighter pilot in a dogfight. Plan your attack, stick to your plan, wait until the target it in your sights before firing.
Patience pays off. Don’t expect to be a millionaire over night. Consider compounding profits. Each good trade or investment gives you a return which you can use to compound your wealth. A steady 1% return a week will compound to be 67% in 1 years. Let your profit accumulate and be happy with little wins. Over time the big ones will come but first learn to walk before you try to run.