Plan the Trade and Trade the Plan

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Buy a stock in accordance of your trading plan. For example, I have in my portfolio a buy below price and I do not buy a stock if it goes above the buy below price because it may expose me to a riskier position. Being conservative has its advantage like having a higher percentage of profit than buying a stock doing cost averaging.

Well, if some of the stocks you are following are below your buy below price, then I am sure you have used up all your funds in your broker account to buy these stocks. What if all your stocks are all above the buy below price and you still have extra cash to use, what are you going to do? The logical thing to do is to wait for the stocks to go down below your buy below price because these stocks will not go up forever. There will be occasional times that they will dip which will present a buying opportunity for you. Don’t chase a rising stock because it might burn you and end up with losing a portion of capital.

One of the most difficult things to do is to sell with a loss. Well, if you are buying blue chips, cut loss is almost impossible except during extraordinary events where the fundamentals of the company significantly changes.

With regards to second liner and third liner stocks, you must stick to your trading plan. Always moderate your greed and lock in the profits. There will always be plenty of opportunity around. If today your stock did not do well there will always be another day. Sometimes out of frustration we sell our stocks and let the emotions run and managed us. That is very dangerous in stock market! Again, you must stick to your trading plan. Plan your trade and trade your plan.

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The loss can be significant to second and third liner stocks and that is very hard to accept. It’s as if you want to smash the computer because of the swelling emotion associated with defeat. I know it’s very hard to keep our emotions from getting us. It’s just human nature. However one must use intelligence and cut the losses if necessary and in so doing, one must exercise laser like focus on the trading plan. It’s the key, everything else is just trivial.

Do not buy a stock if you haven’t study its technicals or fundamentals. Practice checking the ticker price intently for movements which may benefit your trading plan. At the end of the day, when you go to the war room you must be equipped with ammunitions and bullets in order to successfully defeat the enemy, otherwise be prepared for an excruciating defeat.