1. Treat Trading Like a Business
This is the first and most important point.
Trading is not a game…it’s business. And if you want to be successful, you have to treat it like one.
If you’re serious about your full-time job, it’s only fair to devote the same level of discipline to trading.
If not, there won’t be a real commitment on your part to improving.
Get in the mindset of finding strategies to make the most of “your business”.
2. Getting Started? Paper Trade To Get Good
This one is especially important for people who’re just starting out.
You have to fully understand the fundamentals (and sharpen your skills) first, before trying to grow your trading accounts.
Paper trading gives you the opportunity to put your skills and knowledge to the test without burning through your hard-earned cash.
You know what’s crazy?
Most people try paper-trading for a couple of days or a week…get some success, and suddenly feel they’re ready to jump in.
Don’t be in a hurry. The market will always be there tomorrow and the day after, so please wait till you’re really confident and sure you’ve learned.
One Thing To Note: As much as paper trading gives you a safety net, don’t fall into the trap of getting used to it. At some point, you will have to drop the stick and pick up the sword.
3. Become a Student of the Markets and Always Keep Learning
The stock market is constantly changing.
Events ranging from simple things like the weather to complex things — like war, politics, news events — all affect the markets in one way or the other.
I’ve been doing this for over 10 years and I’m still learning every day. It’s a continuous learning process.
If you have a good grip of past trends and the current market situation, you’ll be better prepared to spot future trends and take advantage of them.
I say it often but…
When starting out, the money isn’t that important. Because the more time that you spend obsessing about money, the more money you tend to lose.
You need to focus on the process and learn. Invest in resources that will help you improve your risk management skills, fine-tune your plan, and overall make better decisions.
4. Your Position Size Matters
A common question that can dramatically affect the success of traders is…
“What’s a good position size — how much money should I risk on a trade?”
The broad answer is “Never trade more than you’re willing to lose!”
As a trader, you should always try to be in control and avoid making emotional, desperate decisions.
Position sizing is determining the amount to allocate to a given trade — while considering risk levels and how it affects my overall account.
Here are two methods I use to determine position size when trading penny stocks.
When done correctly, it can increase your chances of success as a trader by helping you prevent excessive (and unnecessary) losses.
Talking about losses…
5. Try To Keep Your Losses As Low As Possible
Entering a trade at the right time is important, but knowing when to exit is even more important.
No one likes to lose money, even though it’s inevitable, anyway.
But having a good risk management strategy can help you keep it low — especially when trading penny stocks that are highly volatile.
That’s why I’ve spent years fine-tuning these risk management principles I strongly follow.
6. Keep a Trading Journal
When you write down your goals in your journal, you can keep better track of your intentions and have better clarity.
It’s been proven that writing your thoughts out helps your brain process them better.
I like to write down any important questions on my mind, random ideas, and curious thoughts that I have about trading. I tend to make a note of key lessons during my losing and winning streaks.
All of this stuff adds more clarity and creativity to my thought process.
7. Stay Away From Low Volume Stocks & Pump and Dump Schemes
For most people, penny stocks are sketchy…
Not all, but most of these are small, unstable, and barely-known companies that might fail in a couple of years.
And because of their volatile nature, some of these stocks are vulnerable to potential “manipulation” by stock promoters and pump and dump schemes.
If you pay attention to your charts and legit news sources, you’ll be able to spot one from a mile away.
The volume of a stock is used to measure the number of shares that are sold or bought at a specific time. And in my opinion, it is one of the most important things to look out for when trading penny stocks.
The last thing you want is dumping your money in a stock and then realizing not many people are interested in it.
If a penny stock has a low volume, please avoid the stock!
Extra Point:
Know When to Stop Trading
Sounds counterintuitive…but you need to know when to take a break.
If you’re on a losing streak, maybe it’s time to take a couple of days off, clear your head, learn from your mistakes and then get back in the game.
Like I always say, the market will be here tomorrow. Relax and take a break.
