Wait for all the stars to line up! Good things come to those who wait, be it low buy prices or high sell prices. Sometimes if you had only waited, you could have sold higher or bought lower.
Have patience! It's without a doubt one of the golden keys to making money in the stock market. The patient trader has self-control and waits for his indicators to tell him when to enter or exit.
Even if the market "appears" to have ended its rally, if it does not meet certain criteria the trader had previously set for himself, he must wait.
If patience is the golden key to trading, then the silver key is doing things opposite from the rest of the market! You want to buy when the average investor is selling and driving the price down.
And when good news is driving a stocks price higher, you want to sell your shares at the over inflated price.
Buying when stocks are falling and selling when they are moving into higher ground is one of the hardest things to learn to do when you first start trading.
We don't have the luxury of holding our stocks for years to help iron out the little highs and lows. We live off the little highs and lows! Buy when there is blood in the streets!
The stock market is very good at playing on your emotions. In order to be a good trader, you must look at the market in a cold, hard way. When the masses are selling in a panic, you must stand fast or step up and buy.
Remember that the market is made up of emotional herds buying and selling in waves. You must be the cold, cunning and calculating wolf looking over the herd for your kill. Don't panic sell and don't buy on hysteria.
Don't use them unless you have to. Don't ever place a market order for a stock at the opening of the market, or when a stock is making new ground fast.
Putting in a market order in the first 15 minutes of the market is a sure way of paying the highest possible price for your stock, because as all the built up orders from the previous day go through, it lifts the stock prices for a few minutes.
You can be pretty sure that your order will go off at the high of the day this way. (but keep in mind it's sometimes handy to sell during this time).
These are almost as bad as market orders. Stop losses are a sure way of selling at a loss.
You can only use them when you are "in the money" and would normally sell your stock, but want to retain a slight possibility that it might continue to go higher.
Sometimes the best way to buy low is to put in an order for a stock at "a price you'd love to own the stock at." Let's assume for a moment that the stock you want is trading at 100, try putting in an order at 95 and wait it out, what do you have to lose?
You never know when you might hit the low for the day that way. It's far better than putting your order at 99, only to find it crashed past that, filled your order and continued down to 95.
You'd be surprised what an effective way this can be to both buy and sell. When you get your "dream" price, it's a great feeling.
Selling is actually harder than buying in many ways. Try to decide what price you want to sell your stock at as soon as you buy it, so when that price does come along, you'll be ready to move.
If there is a free lunch in day trading, it's picking stocks that are making new medium trend highs to trade with. That way if you do get in at the wrong point, there's a much better chance that your high buy will turn into the next low buy as the stock moves higher in its overall trend.
This is one of the only safety nets you have in day trading, when combined with patience and some extra cash reserves.
IF YOU ARE WRONG:
Then you are wrong! Don't try to justify a bad trade by convincing yourself it will turn into a good trade.
If you buy on the high side, then sell at break even and buy back in on the low side. Talking yourself into believing that your mistakes are actually wise moves in disguise is very costly. Be professional enough to spot your mistakes and move on.
PROFITS AREN'T AS IMPORTANT AS YOUR CAPITAL:
If you miss out on some profits, that's okay, you can always find another stock to buy.
However, if you lose a big chunk of your trading money then the game is over. Protecting your trading capital is your number one mission, followed, of course by increasing it.
DON'T GET GREEDY:
Greed will make you poor! If you experience an overwhelming emotional urge to take a trade because you are sure to make a killing this time, then you are experiencing greed.
Greed and fear drive the markets and for the most part drive the average investor to making mistakes. Sell with good profits, but don't get too greedy. A savvy trader once said, "Pigs get fat, hogs get slaughtered".
Big moves up are sometimes followed by big moves down and visa versa. Sell on abnormally large moves to the upside and buy on abnormally moves to the down side.
They are generally out of character of the stock and can many times be followed by a "snap back" on the stock. Knowing your stock's trading habits can be very helpful.
Stocks that are hot move great, but nothing lasts for ever. If you buy a stock for a big, quick gain and find that the stock has "lost its heat," don't allow your money to be dead -- unless you are looking for an investment!
Sell and move on, don't justify your mistakes - it tends to be a costly justification process in the long run. Others in the stock for the hot ride will start to bail out as the stock cools off and looks like it"s not capable of making "hot moves".
JUSTIFICATION IS COSTLY:
Don't hold a losing stock to justify your purchase. If you make an incorrect buy or end up with a stock that is falling when you thought it would climb handle those mistakes quickly.
Do not be tolerant of stocks that are costing you time and money! Get rid of them!
SUDDEN MOVES UP:
Be very careful buying stocks that have just made sudden moves up. Many times they are following very closely with sudden profit taking.
TIME TO BUY:
One of the best times to buy is when a stock is going down on low volume (with no news) as compared to recent increases on higher volume.
This suggests that the selling is lighter and that the holders of the stock that are going to sell have finished selling and the rest are holding.
The sellers of the stocks then may come back into the market when they see the price stabilize. It's also not a bad idea to sell on high volume on the way up, as this usually creates abnormally high prices that cannot be maintained for long.
Do not day trade in thinly traded markets, or on stocks that have very low volume. You may find you can't get out of the market as timely as you think.
TRADING TRUISMS ARE LIES:
If it were possible to implement, "Buy low and sell high" or, "Cut your losses and let your profits run" in any meaningful way, then the majority of the people would be making money.
Your investment method starts losing, so you switch to another, which immediately also starts losing ...
By switching, you open the door to getting the worst results from each method and none of the good and the overall result can be much worse than even the worst system followed faithfully.
You can't take advantage of market dips if you are already in the market. It's better to be out of the market more for day trading than in the market.
This will allow you to get in and out with profits fast and be on the sidelines should dips occur. Try to be out of the market more with your trades and in the market more with your investments!