1. Emotions are the enemy of the trader. To succeed, manage risk by not taking greater risks than you are comfortable with.
If the potential of losing more than $500 on a stock trade keeps you up at night, then do not risk more than $500. The less emotional attachment you have to the outcome of a trade, the more rationally you will execute it.
2. Use stop-loss orders to avoid big losses that can wipe out gains from successful trades. Enter a stop-loss order once you are in a trade, and stick to it. If your brokerage does not offer stop-loss order capabilities, consider changing brokers.
3. No one cares more about your money than you do. Do not rely on others to make you money. Take control and stay informed. Seek guidance from others, but ultimately, your market success depends on your actions.
4. Winners predict while losers react. The market moves based on expectations of the future, not past events. Use historical data to anticipate future trends but avoid making decisions based on widely-known information.
5. The stock market is not fair. A small group of investors always has an advantage due to their access to better information. To succeed, figure out what informed investors are doing and follow suit.
6. Information is biased. The financial industry has a vested interest in promoting stock purchases, so trust nobody in making investment decisions. Rely on the market, as it is the only source that doesn’t lie.
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