Keep It Simple When Trading

The best way to make a lot of money in the stock market is to keep it simple when trading. To be a successful trader you do not need to know everything about a company or anything if you want to be real simple. Let us take a look at how Tommy learned that the hard way.nn Tommy is an average man. He has a secure job, a nice house and a great family. When it comes to investing, he is inexperienced. All of his friends are investing and doing really well. But Tommy doesn’t want to invest until he knows everything about the company he is investing in. nn Finally he decides to learn how to trade. He buys 100s of books and spends thousands on education. He hears about all these ways in which people make money. Now he is excided. He figures if one thing works for one investor and another thing works for another trader he can make a lot of money by putting them together. nn Now Tommy makes a list of 30 triggers to get into a stock and 30 triggers to get out of a stock. Then he waits. Many months go by and he doesn’t trade. None of the stocks has hit all 30 of his triggers yet. Finally, after 16 months, he a stock that hits all of his triggers.nn Tommy immediately buys the stock for $40. It goes up to $45 and then starts heading down. It goes lower and lower every month. Tommy can’t figure out what he did wrong. It was a strong stock in a great industry group. It was in an uptrend. Every indicator he used said buy. And now this stock is at $30. But some of his sell signals still don’t tell him to sell. n So, he holds onto it. The stock plummets lower and lower. Finally he sells it for $10. Now Tommy is upset. He has been trading for 20 months now and all he has to show for it is a 75% loss. He believes that if he just had 10 more signals he would be able to get into that hot stock.nn What Tommy should have done was find 1 or 2 signals that he really liked and develop a system around those. His system was so complex he couldn’t even explain it. He violated one of the most important rules when trading, keep it simple when trading.nn Remember your system should be simple. The less complex your system is the better. Here is a list of things you should consider when you are developing a trading system to see if it is simple enough to work.nn1) Does it have a set entry and exit point? There will be no questions about when to buy or sell. If you find yourself wondering what to do get out, or don’t get in.nn2) Can I explain it to a child? If you can’t tell a little kid how you make trading decision and have him understand it maybe you should not trade with it.nn3) Can I trust myself to follow it? If you can’t trust yourself to follow the system then maybe you shouldn’t be trading.n4) Does it work? This is the last thing you must consider when developing a trading system. You can figure this out by paper trading and back testing your system. nnFor more information about how to make money in the stock market visit http://www.stocks-simplified.com n