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Sri Lanka Equity Forum » Expert Chamber » Your Stock Trading Rules

Your Stock Trading Rules

Go down  Message [Page 1 of 1]

1 Your Stock Trading Rules on Fri Sep 16, 2011 7:46 pm

sriranga

sriranga
Co-Admin
One of the hardest things about stock trading is self-discipline. You have a set of rules you use for trading, whether you realize it or not. The hard part is sticking to those rules. For example, you may tell yourself that you will never buy a penny stock. Then one day you get a tip or rumour that is boasting about "the next big thing" in the stock market and you go ahead and buy that penny stock. One day later, you have lost 50% of your investment and you are mad at yourself for violating your own rules!

A good solution to the self-discipline problem is to write out your rules on a piece of paper. Better yet, make many copies of this paper with checkboxes next to each rule. Before you place a trade, make sure the stock fits within each of your rules and put a check next to them. That will help you stay on track! It may sound silly, but it is actually quite helpful. After all, we are human, and humans like to break rules!

In fact, one of your rules might even say, "There are no rules." There will be times when it's okay to break one or two of your rules because of a special scenario. You may find a stock that is a "sure thing" and you just have to ignore those couple rules that it violates. Of course if you get burned on the trade you will know why! Remember, there are no sure things in the stock market! There are no stocks that can guarantee a profit or a dividend. They can always drop in price or go bankrupt. So stick to those rules as much as you can!

Here are my rules:

1. Never put more than 1/3 of your money into one stock.
2. If no opportunities are found, stay out!
3. Avoid trading on Mondays. They have big drops sometimes.
4. Look at charts of the CSE to see how the market is doing.
5. Keep track of economic news schedules, such as Company announcements.
6. After a huge loss, take a week off.
7. Research your holdings once a week.


Here are some stock-picking rules used by other people:

1. Predictable growth in free cash flow
2. Rich in assets, with little or no debt
3. Low multiple of price to free cash flow
4. Generous returns on equity, coupled with a reasonable cash flow multiple
5. Insider ownership and shareholder-friendly management
6. Insider buying, especially by executive officers
7. Leadership of an important niche

Feel free to use these rules or modify them to suit your trading style. There should also be different rules for day trading, short-term trading, long-term trading, and so on. Also, getting an accountability partner will help you stay on track. Show them your trades, when you bought them, why you bought them, and when you plan to sell.

There's a popular saying , "Plan Your Trade and Trade Your Plan." That simply means, decide when you're going to buy and under what conditions you will sell, and then stick to your plans!

Best of luck to you in your trading endeavours!

For further reading about trade plan................
http://forum.srilankaequity.com/t10143-plan-your-trade-and-trade-your-plan

Source: How The Market Works

http://sharemarket-srilanka.blogspot.co.uk/

2 Re: Your Stock Trading Rules on Fri Sep 16, 2011 8:09 pm

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
Excellent advice, sriranga!

Rules, discipline and patience are so important on the stock market. Investing in a share should never be an impulsive decision... Even when you go to buy vegetables, you prepare a shopping list. You check the quality and price... Why should it be different for shares?

Each time you buy a share, you are giving away 1.12% as brokerage and taxes. Make sure that the share has a reasonable chance of increasing much more than that, within a reasonable time.

3 Re: Your Stock Trading Rules on Sat Sep 17, 2011 5:05 am

RealViewer


Senior Equity Analytic
Senior Equity Analytic
@sriranga wrote:
After all, we are human, and humans like to break rules!



This is the thing I lack most of the time. I will try to stick to checklist. for sure it will generate some good results.

4 Re: Your Stock Trading Rules on Sat Sep 17, 2011 8:37 am

rmark

rmark
Manager - Equity Analytics
Manager - Equity Analytics
Dear Sriranga,
Thank you for the excellent advice!

5 Re: Your Stock Trading Rules on Thu Oct 03, 2013 11:45 pm

emaxlk


Stock Trader
Anybody here to support me?
which bank is best for Current Account. - (Pvt) Ltd. Incorporation.
I have sole proprietor Current Account @ Smpath Bank & I need to open new Current Account for Incorporation.
Please suggest me a best bank.
thanks..
Muditha Smile 

6 Re: Your Stock Trading Rules on Fri Oct 04, 2013 10:16 am

janakatk

janakatk
Senior Equity Analytic
Senior Equity Analytic
Go for a bank with with internet banking facility for corporate..

I prefer mostly Com Bank, HNB and BOC also alternatives for me

7 Re: Your Stock Trading Rules on Fri Apr 11, 2014 10:24 pm

SHARK aka TAH

SHARK aka TAH
Expert
Expert

8 AWESOME on Sat Apr 12, 2014 1:14 pm

Pethi

Pethi
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
shark you are entertaining us. Thank you

9 Re: Your Stock Trading Rules on Tue Apr 22, 2014 9:10 am

SHARK aka TAH

SHARK aka TAH
Expert
Expert
Key Performance Indicators - 17 04 2014.pdf

Please click the link

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