Speculating as a trader is not gambling. The difference between gambling and speculating is risk management, with speculating, you have some kind of control over your risk, whereas with gambling you don't. Risk is inherent in every trade you take, if you can measure risk you can manage it. Psychologically, you must accept this risk upfront before you trade.
•Risk per trade should always be a small percentage of your total capital. A good starting percentage could be 2% of your available trading capital
•Learn to love small losses, stop loss are designed to prevent the 'it will come back' mentality and limit losses before they escalate. For example, if a stock breaks below a key support level, traders often sell as soon as possible
•Stop losses should not be closer than 1.5-times the current high-to-low range (volatility), as it is too likely to get executed without reason. Make sure stop loss doesn’t get caught in volatility
•Adjust the stop loss according to the market's volatility; if the stock price isn't moving too much, then the stop-loss points can be tightened.
•Slide your stops, if the market is moving in your favor keep changing your stop loss to secure your profits.
•Consider setting limits on the amount you win or lose in a day. In other words, if you reap an $X profit, your done for the day, or if you lose $Y fold up your tent and go home. This works for investors because sometimes it is better to just 'go on take the money and run,'
When going from virtual to real trading, you are entering into the most difficult step trading psychology, while it may be very easy to trade when the risk of loss does not exist, when hard-earned dollars are thrown into the mix, focus and price objective can go out the window. You should first spend some time getting to know yourself and the particular mind-traps you tend to fall into. All traders will experience at least one mind trap, but it is the very best traders that learn to recognize, understand and neutralize them.
•Greed can lead a trader to hold on to a position too long in hopes of a higher price. Fear can prevent a trader from entering trades along with taking them out of positions far too early
•Paralyze by analyze is an interesting phenomenon in which traders get so caught up in analyzing everything about a potential investment that they never actually pull the trigger on the trade.
•If you are not emotionally and psychologically ready to do battle in the markets, it is better to take the day off - otherwise, you risk losing your shirt
Do your Home Work
•The best way to objectify your trading is by keeping a journal of each trade, noting the reasons for entry and exit and keeping score of how effective your system is.
•Know where the likely psychological price triggers are as other investors know them and are waiting for them (Support and Resistance)
•Use known fundamental events, such as earnings releases or FDA decisions, as key time periods to make sure to be in or out of a trade as volatility and uncertainty can rise
•Find out the main news that moved the market recently, find the major support and resistance of the day, what news is coming out that might move the market
•There is an old saying in business: 'Fail to plan and you plan to fail.'
•Evaluate the potential profit for each trade and whether it worth entering it (is there a strong support resistance nearby?)
•Set entry and exist rules - conditions that must be met to enter and exit the trade. Developing exit strategy: How long am I planning on being in this trade if my target is not reached?' Secondly, 'How much risk am I willing to take?' And finally, 'Where do I want to get out?'
•Keep excellent records – All good traders are also good record keepers. If they win a trade, they want to know exactly why and how. More importantly, they want to know the same when they lose, so they don't repeat unnecessary mistakes. Write down details such as targets, the entry and exit of each trade, the time, support and resistance levels, daily opening range, market open and close for the day, and record comments about why you made the trade and lessons learned
•Periodically review and assess your performance. This means not only should you review your returns and individual positions, but also how be prepared for the trading session, how up-to-date you are on the markets and how your progressing in terms of ongoing education