Predicting the future is virtually impossible, but if you take a no-nonsense approach to the stock market, profits may soon follow.What do I mean by a "no-nonsense approach"?
- Every trade you place should represent no more than 1% of your total capital or assets under management. Keep your losers/losses under control and the winners/profits will take care of the rest.
- Every trade must have a specific catalyst that you attempt to game. After the catalyst has occurred, you dump the position. No matter what.
- Do not buy something just because you think it is cheap. There are tons of cheap stocks currently in the market, but that doesn't mean they won't fall even more. A cheap stock can get cheaper and cheaper and cheaper as it painfully eats away at your capital. The ideal long trade is a cheap stock with a catalyst that may propel it higher.
- Keep very tight stop orders on all positions. There are many different opinions of what the ideal stop order is. I use 5% to 7%.
- Keep a close eye on the CBOE Volatility Index, commonly known as the VIX. There is no better gauge of raw fear in the market than this index.