This is a Guest Post by Sam McCallum at HoneyStocks.com.
We all understand the Stock Market can either reward us massively, or have us huddled in a corner crying like a 2yr old… it’s both a magical place full of reward, but it’s also Mordor with Gollum lurking around the corner… yet somehow, we’re all still drawn to it like a moth to a flame, because we know there’s a rainbow with a pot of gold waiting for those that can master it and take the time to educate themselves properly.
On a personal level, I have been on quite a journey, and it’s been a journey that’s been built upon failure and then ultimately success…. will I become a failure again? Quite possibly, even with my disciplined approach – because I know the market can pull the rug from under me, but within this post, I’m going to share 50 key things I’ve learned along the way, that will stand me in good stead moving forward, and I hope they help you out too.
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Price is the Number 1 Technical Indicator
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EVERY single Technical Indicator out there should be used as a SUPPLEMENT to price
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Day Trading doesn’t work – it’s too inconsistent, and ultimately ends in failure
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Long Term Investing is smart, but too often it takes too long to be rewarded
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The best traders combine Technical’s with a small amount of Fundamental’s
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Trading can be simple… it’s not easy, but it can definitely be made simple
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Sector Rotation is very real
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Stocks don’t go up forever
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Trade Management is CRUCIAL to long term success
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Allocation of risk is probably the single most important aspect of Trading, and it’s more important than stock selection
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Having watch lists set up, will help you massively
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Date stocks…. NEVER marry
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Independent Thinking is an absolute must… never follow trade ideas blindly
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ALWAYS carry out full due diligence on every single stock you plan to trade
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Consider what the overall market is doing before taking a position
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Trading in the direction of the Trend will always work out better than predicting a reversal
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Setting up price alerts and having a bank of pre-built Technical Analysis will save you time in the long run
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NEVER gamble pre-earnings – you’d be as well going to Vegas
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Figure out your style, don’t try to mix and match different styles and force trades
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You are at the mercy of Wall Street – ALWAYS
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When 1 market declines, another starts moving – focus on the overall market, not just 1 area
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Good traders learn more from their losses than their winners
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You’ll never pick the top and bottom of price, learn to just eat the meat within the sandwich
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Understanding KEY support and resistance is crucial to the success long term
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Know when to take profits off the table
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Different Markets mean different styles, having the ability to adapt and switch styles is a massive advantage
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Watching CNBC / Bloomberg etc is a waste of time and clouds decision making
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Price will tell you what is going on in the news… follow price
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Many of the talking heads on the news have an agenda.. be wary of their agenda… are they telling you to buy Stock X for a reason?
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Let your winners run… this is easier than you think
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Identify strength, then identify the individual components demonstrating that strength
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Treat your trading like a business, and give your preparation the respect it deserves
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Education is by far the best investment you will make
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Learning from YouTube and Stocktwits is a recipe for failure
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Less is more
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Respect your stop loss – NEVER deviate from it – it only ends in pain
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You’ll NEVER stop learning
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Wall Street computers are MUCH smarter than you are
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Be open to EVERY possibility… because you’ll be wrong, just as much as you’re right
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Simple Moving Averages are in my opinion the number 2 Technical Indicator
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Know when to go long and when to go short… it pays well
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You do not need to stare at a screen all day in order to make money in the markets… 30mins a day works just fine
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Contrarian thinking in terms of stock selection, appears to be pointless… I’ve not met a successful contrarian yet
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If you’re a Fundamental only trader.. be prepared to bag hold for a LONG time before you get paid
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Have zero emotion to any trade (this is acquired through time and practice)
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Taking an extended break is perfectly fine if you find yourself practicing bad habits
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Over Trading NEVER works out well
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Discounts are good… but knowing when to act on discounts is better
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Identifying good risk:reward opportunities is what it’s all about
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Finding a style of trading that fits around your lifestyle is best – it’s why Trend following works best for most
As you can see, there are many aspects to trading, that many simply don’t consider, and the reality is, I probably could have come up with another 200 points in addition to those 50 names above.
If you’re interested in education and you struggle with your trading results… you can check out our style below with our up to date Market Analysis.