I’m not a professional by any means but I am an avid student of the game.  Here are some tips that I sent to a friend.

Trading will take a really long time….if you really love it immerse yourself.  Don’t force it.  Don’t confuse obesssion to trading to the love of trading.  Those are two different things.  Just be careful.  Take your time, I first thinking about fundamentals then use technicals to confirm and figure out timing.  The most important things is something merely moving averages and volume signals. But use some oscillator to help you…stochastics are good but give some bad signals.   The only things that really don’t lie are price and volume.  They are the writings on the wall.

You must practice excellent risk management.  Gamblings ruin is probably most people’s downfall.  Their positions are too big.  Yes I agree with the 2% rule.  Some people use the 1% rule for bigger accounts.  I use 1-3% depending on the stock because of volatility.  What you want to do is figure out what is best for you.  What is your risk tolerance?  So basically combine your stop, risk management and position size.  For example:

Balance is: $100,000
Risk amount: 2% or $2000
Stock Entry is: $50
Stop is: $45
Risk Amount: $5
# of Shares = $2000/$5 = 400 shares
Total Stock Position Size: 400 shares X $50 = $20,000

Exit Target = $60
Potential Profit: $10
Profit: $10 X 400 = $4000

Reward/Risk Ratio: $4000/$2000 = 2

Ok there’s a simple break down of how you should manage everything.  The stops and exits are up to you. I always make sure my reward to risk ratio is 2 and higher.  Nothing under 2 for me.  Also they are just examples but always have a plan.  Read my blog www.misterbull.com – yes I know it’s very ironic that I’m so negative.  I’m just being real.  But one thing that I’ve learned about trading is that you are human.  You are not perfect so be able to accept that you will have a large amount of losing trades.  Sometimes the best traders only win 30% of the time but they have excellent risk management.  They cut their losers and let their winners run.  That is probably the hardest part.