Importance of an exit strategy:

“The unsuccessful investor is best friends with hope, and hope skips along life’s path hand in hand with greed when it comes to the stock market. Once a stock trade is entered, hope springs to life. It is human nature to be positive, to hope for the best. Hope is an important survival technique. But hope, like its stock market cousin’s ignorance, greed, and fear, distorts reason.”

“I believe that having the discipline to follow your rules is essential. Without specific, clear, and tested rules, speculators do not have any real chance of success. Why? Because speculators without a plan are like a general without a strategy, and therefore without an actionable battle plan. Speculators without a single clear plan can only act and react, act and react, to the slings and arrows of stock market misfortune, until they are defeated.”

– Jesse Livermore, “The Great Bear of Wall Street” (1877-1940)

 

Manage risk by keeping your expectations realistic:

1. Do not invest your entire account in one position.
2. Do not expect to sell your positions at their peak.
3. Set strict guidelines about how much risk you are willing to take.
3. Lock-in profits by reducing your holdings.
4. Large gains happen but aiming for smaller gains can help you to maintain winning results.
5. Expect to incur losses, it will happen.

 

Familiarize yourself with advanced orders and use them to your advantage:

1. Limit orders for buying and selling at a specific price.
2. Trailing stop orders for capturing momentum.
3. Stop orders for stepping out of a position.