10 Golden Rules of Trading Stocks

10 Golden Rules for trading in stock

By Investdata Analysts

NSE index rise, as window-dressing continues ahead of earnings season

Basic Rules of Trading Stocks or Tips to Follow When Investing or Trading because Chart Patterns are very important it tells what has happened and what is about to Happen.

  1. Make sure understand chart patterns and the stock that has a well-formed base or pattern before considering tojump into the stock. Investdata highlights stocks with these patterns in their newsletter and market updates.
  2. Consider the stock as it moves over the trend line of that base or pattern and make sure that volume is above recent trend shortly after this “breakout” occurs. Never pay up by more than 5% above the trend line. You should also get to know your stocks’ thirty day moving average volume, which you can find in buy and sell signal setup
  3. Be very quick to sell your stock should it return back under the trend line or breakout point by 10%. The more expensive the stock, the more leeway you can give it. Some people employ a 7%-10% stop loss rule. This may mean selling a stock that just tried to breakout and fails.
  4. Sell 20 to 30% of your position as the stock moves up 15 to 20% from its breakout point.
  5. Hold your strongest stocks the longest and sell stocks that stop moving up or are acting sluggish quickly. Remember stocks are only good when they are moving up.
  6. Identify and follow strong groups of stocks and try to keep your selections in these groups
  7. After the market has moved for a substantial period of time, your stocks will become vulnerable to a sell off, which can happen so fast and hard you won’t believe it. Learn to set new higher trend lines and learn reversal patterns to help your exit of stocks.
  8. Remember it takes volume to move stocks, so start getting to know your stock’s volume behaviour and the how it reacts to spikes in volume. You can see these spikes on any chart. Volume is the key to your stock’s movement and success or failure.
  9. Many stocks are mentioned in the newsletter with buy points. However just because it’s mentioned with a buy point does not mean it’s an outright buy when a buy point is touched. One must first see the action in the stock and combine it with its volume for the day at the time that buy point is hit and take keen notice of the overall market environment before considering purchase. Are stocks moving smartly or are they acting sluggish or even worse, are we in a heavy sell off?
  10. Never go on margin until you have mastered the market, charts and your emotions. Margin can wipe you out.

NGSE outlook positive, time to diversify portfolio long-term ahead of possible correction