Rules For Trading | Alpha Street

Rules For Trading

July 19, 2019

RULES FOR TRADING

By www.alphastreetinc.com

 

  1. Always manage your risk. It doesn’t matter if you are a day trader, swing trader or long-term investor in a company; you have to always manage your risk.
    1. Position sizes, depending on your risk tolerance should not exceed 5% of your capital. Aggressive investors should never exceed 25% of capital.
    2. Always have a defined exit strategy, you can be the best investor on the planet but its possible to be wrong from a timing perspective.
    3. Take profits on the way up, 25% of position should be sold after the first 5 – 10% move.
    4. Establish a MAX draw down, goes back to point B. I set mine at 20% as I tend to be a longer-term investor. Examples. 20% loss on 5% position is 1% decline in Portfolio, 20% loss on 25% position is 5%. Many times, I see retail investors ride stocks down 50% or more in hopes of recovery. It is a lot easier to recover 5%, than it is to recover 10%.
    5. Day traders should utilize max draw down based on capital. For example, if you go long 100% of your capital, you should keep a 5% max draw down on the investment.
  2. Diversify holdings; At no point should 100% of your total savings be in the stock market. Always keep some money on the sidelines.
  3. Typical Aggressive portfolio should be made of 8 diversified holdings (10% Each) and 20% Cash at all times.
  4. Do your own research, never listen to a self-proclaimed expert. Or even worse a twitter/Stocktwits stock jockey. 3 sites I like to go to, seekingalpha.com, www.nasdaq.com & www.yahoo.com Finance section. That is honestly all you need to do it yourself.
  5. Investing is a marathon, not a race. Example. DRYS, catching 100% to 1000% returns is a fluke, just ask 9 out of 10 investors who lost everything.
  6. ALWAYS LIVE TO FIGHT ANOTHER DAY

 

 

DO YOUR OWN RESEARCH AND SPEAK TO AN ADVISER FOR INDIVIDUAL INVESTMENT ADVICE, www.alphastreetinc.com makes no endorsements or guarantees on investments.