1) Always do your homework before you buy a stock. Have a tr...
1) Always do your homework before you buy a stock. Have a trading plan before you buy or sell a stock. Know what business the company is in. Read up on company news and announcements on a micro level. Also read macroeconomic news of the industry the company is in. Buy the stock if the company has good fundamentals.
2) Don't speculate. Don't buy on rumours. Don't buy because stock has run up a lot. Don't chase. It is more likely to have a correction after a bit of run up. You may end up with a loss.
3) Now that you have selected your stock, decide on your buying price. Find out the support and resistance levels to determine your buying and selling prices.
4) You can also take the average of analysts' target prices to determine your selling price. Then apply a risk factor to determine your final price. This risk factor depends on whether market is bearish or bullish and whether your are risk averse or a risk taker.
5) You must be disciplined. You must not love a stock or have any emotional attachment to a stock. Don't just buy a stock because you like it. Don't just listen to good news but bad news as well.
6) Don't be too greedy. Don't set too high a selling price, just a reasonable one will do. Once you take profit, it is money in your pocket. If you are too greedy and when the price falls, your profit may even turn into loss.
Nothing is foolproof. If something goes against you or you make a mistake, cut loss early. Say around 10% drop from your buy price. It's important to preserve your capital. You don't know how much the price will drop. If the stock is good, you can buy back at a lower level. If not, you can switch to better stocks.
I am confident that if you follow the above habits, you will be a more successful and better trader.
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