1. I always prevent trading the runaway trains, this can also be called “do not chase”. You look at a stock on a nice trend then enter at your value, I usually wait for pullbacks and then enter at the rate I want. Now and then I miss a trade and that is OK. You can also trade these pullbacks, in case your already in and the stock goes crazy seek a point to take benefit or at least improve your stops and re enter on any pullbacks.
2. Averaging down is traditionally an undesirable idea. Traditionally you’ll end up in the red for twice as a number of stocks. You will be able to reduce your price basis on the contrary you have already read the graph and your previous entry point wrong. I will do this for short scalps once I am early and normally the trade turns out ok, I do not double down on a dying share, instead I double up on winning shares. This give you earnings that offsets a stocks loss, also in case your already trading a stock well, then keep trading it.
3. Set and keep stops before your trade. No one likes to take a loss, they see the stop is going to be hit and cancel the sell. This is insane, you planned the trade a particular strategy, including the stop. Let it hit and re-evaluate whether or not you prefer to buy this share once again.
A similar rules apply for exits on benefit, always take your revenue, exit once you hit your sell point. I just disobeyed this rule yesterday, I had the QQQQ at the minimal, income of regarding 600, desired to discover if I might eek out a lot of extra profits so I held. Next think I realize is I obtain distracted and recheck the share to get that I am back to even. The QQQQ closed with me about 600 in the red. This is actually the cause I’m writing about errors right now.
When a stock is increasing it is quite tempting to enhance your stops too close to the price and any pullback will look at your stopped out.
4. Are you diversified? Mindful, you need to be diversified, but don’t over diversify. It is tough to monitor all markets and all trends including individual stocks during the day. I stick with certain stocks and the QQQQ now and then a share gets slow to trade and I search a new one to trade. You all have so much time and simply 2 eyes. Realize your restrictions. Trading certain areas is a concept many investors enjoy, it helps them gauge specific trends for the overall sort of share they are investing i. e. oil, gold, tech etc. Nothing wrong with trading simply one stock and learning it!