Lessons Every Stock Trader Must Learn

Lesson 1: Penny Stocks Will Ruin You

Yesterday I came across a post  that I thought was quite insightful and well written.  What really jumped out at me was the opinion of penny stocks because it's one that resonates with me.  There are lots of ways to make money investing but I am convinced that penny stocks will never get me to my financial goals.  I prefer to manage my risk by working only with true growth stocks.  The sooner you learn to steer clear of penny stocks the better as far as I'm concerned.

Lesson 2: Know Your Trading 

Personality

In my role as a Meetup coordinator for IBD (Investors Business Daily) I am constantly exposed to people who employ all kinds of different investing methods.  For the last 25 years I've thought of myself as an investor but recently it occurred to me that I've actually become a trader.  If you're wondering what the difference is, it really boils down to your time frame. 

I simply don't have the stomach to sustain the types of double digit losses that investors might see over the life of their positions.  Also, I don't have the patience to sit in a position for more than 8 weeks at a time so long term involvement doesn't really interest me.  Knowing that, I've committed myself to planning all of my positions from the perspectives of a trader instead of as an investor.

Lesson 3: Have A Process

My trading process has been methodically put together through years of classroom training as well as trial and error.  I am a Growth Stock trader and the core system I follow is the IBD style of investing in Growth Stocks.    

No matter what process you decide to use, it's only going to work if you stick with it.  The moment you start to stray or take liberties, you've increased your risk along with your chances of losing money.

Lesson 4: Have The Right Tools

If you have the same trading personality as me then the core tools I use should prove effective.  Here are just a few that have enabled me to Out Perform the Genaral Market as measured by $SPY

Investors Business Daily - Pay no attention to the dated website.  IBD is perhaps the best data company in the business.  If you work with growth stocks in any capacity whatsoever, they are a must have.  

Toms Trading Tools - Tom is one of the few people in the investment industry that I would consider a mentor.  I first met Tom when he was with Optionetics and I was instantly impressed with his market knowledge.  What impressed me even more was how he put his knowledge into an actionable process.  Switching from analysis to action is perhaps one of the most important lessons I learned from him.  

Value Line - I look to Value Line to help me get beyond what the daily and weekly charts are showing me.  Typically I keep my process as data centric as possible so that I can stop my emotions from influencing me.  Once I get to analyse my evolving Watch List of Stocks, I do a side by side comparison of the greatest growth stocks out there.  I dig deeper on their fundamentals.  Value Line gives me the objective analysis I need to verify the under currents.    

Lesson 5: Remain Disciplined And Organized

This lesson is easily overlooked which is why I think it's so important to mention it.  There's a common denominator among masters of a profession.  Whether you consider; athletes, business people, artists, crane operators, journalists, or any other profession for that matter, the best performers always bring a high level of commitment to the table.  At this point in my career, trading stocks is my profession so I make every effort to produce with an equal level of commitment.

In an effort to help others stay organized, I put together a handy little spreadsheet that includes formulas for my core criteria. It can be easily updated as the health of a stock changes too.  

Happy trading!

AMIN

Here is an inspirational 30 mins video of Kobe Bryant and his " Mamba Mentality ".

Applying his Principles and Mind set will help you become a profitable trader consistently.

https://youtu.be/Da-v4--Qn0U