If you really want to be profitable with your investing and trading you must first take it seriously. Now I know you’re probably thinking ‘how am I not going to take my own money seriously‘?
The truth of the matter is that most people are not consciously making that decision. They figure they’ll put ‘X’ amount of money in the market and just see what happens. No one does this in any other area of their life, so why should your stock portfolio be any different?
To have a profitable trading strategy you must have just that…a strategy. If you don’t know how or when you are going to make a trade that’s a sure fire sign that you are probably going to lose a significant amount of money with any position that you enter.
Know When You’ll Sell Before You Buy
With each and every position that you open you should already know EXACTLY when you will close it out. Many people buy stocks and options and just hope or pray that it will rise in value, and if it doesn’t they just hold on to it until they eventually lose all or most of their initial investment.
When you put on a trade you should also know what your break even point is. In other words, what is the stock price at which I don’t lose or gain any money? If you don’t know your break even how will you know when you’ve actually made any money?
In addition to your break even point, you should know when you will close out a position; if it is winning or if it is losing. Knowing when to take profits is just as important as knowing when you should cut your losses.
No business operates without knowing when they have a profit or a loss and neither should you when it comes to your trading. Treat your investing as a business and it can pay you for a lifetime.