10 Essential Trading Elements

1. You can not take more risk than you are comfortable with - emotion is the enemy of the trader. Most of us are slaves to our emotions, which is why most traders do not even apparent simplicity trade. To succeed, you need to handle emotions, and the first step toward emotional coping is not to take more risk than you are comfortable with. If you can not sleep at night over the potential for losing more than $ 500 on a stock trade, so you should not risk more than $ 500 on a stock trade. The less you care about the outcome of a trade, smarter you will carry it.

2. Stop loss orders should be used - a big loss can wipe out the gains of the five winning trades. Success requires that you do not take large losses, use stop loss orders. When you are engaged in a trade, enter a stop loss order and stick to it. If your brokerage does not allow to execute stop loss orders, then change brokers.

3. No one cares more about your money than you - you only really care whether you make money or not. Therefore not dependent on others to make you money, you have to take control and know what is going on. You can use the skills of others to help you make decisions, but ultimately, your success in the market comes down to what you do.

4. Losers react, winners predict - the market is indifferent to what happened in the past. If you are using publicly available information to make trading decisions, then you are using old data. The stock market moves on what it expects to happen in the future and not about what already happened. Use what happened in the past to give clues to what might happen in the future, but do not make decisions on information that is widely known.

5. The stock market is not fair - within each population, there is a small group of investors who know more than the general public. They have an advantage because they can better predict what a company will do in the future. To succeed, we need to find out what investors with better information are doing and then do the same.

6. Information is biased - the financial sector wants you to buy shares. The brokerage firms that finance companies, newsletters that get paid to advertise the company's history, the promoters to get paid to promote stocks, media, selling more advertising in an up market, and of course that the companies themselves all the benefits when stock prices go higher. The more buyers, higher prices yesterday. Trust no one when making investment decisions, because everyone can have a bias. Only the market can not lie (though it may seem pretty stupid sometimes), therefore confidence in what the market tells you.

7. Hard work does not make money in the market - you must work hard to learn how the stock market works. You have to work hard to learn to control your emotions. You have to work hard to learn discipline. However, most money is made in a market that is trending view, one where there are lots of options and it seems easy to make money. When the market is not trending view, it is harder to find opportunities. Working harder when it becomes hard to get you to take marginal trades. Take the obvious trade, they are more likely to work.

8. Black boxes do not work - there are plenty of companies selling venues magically spit buy and sell recommendations. The stock market is like a flu virus, just when you think you have it figured out, that changes into something else. Therefore, systems must also evolve with the market. A system that worked in the past may not work in the future. But what always seems to work is to understand how people and crowds behave. Learn it, and you can start downloading the stocks in a market condition. More importantly, to learn the art of trading well, knowing that you can not always be true that you have to limit their losses and let profits run and that you have to understand what motivates people to buy and sell. Systems, indicators, and computer programs are simply tools to help you make better decisions.

9. The stock market is usually effective - indeed, stock, futures, currencies and any other market, there's enough people trade in them is usually effective. That means most of the time you can not beat the markets. To do better than the masses, you have to identify situations where market efficiency is to break down. It occurs when the volume is emotional or when small groups of investors trading on private information. Normally that is easiest to find when stocks are trading anomaly in terms of price and quantity. Focus your attention on the abnormal behavior when looking for trading opportunities.

10. Discipline is vital - you need to manage risk effectively, you need to use stop loss orders, you must always be looking for high probability trading opportunities, you have to avoid taking too much risk and you have to let winning positions run. Laws of commerce are nothing if you do not have discipline to follow them.

The very first sentence:

"A successful trading in the stock market requires much more than knowing what to buy or sell."

In other words ....

IT'S NOT WHAT YOU TRADE, it's how you TRADE IT!