Online Stock Trading

Trading with the help of computer having internet connection and online trading account is called Online Stock Trading. Basically people use online stock trading who want to trade themselves.

Essentials of Online Trading

• You have to open an online trading account with any of the bank or financial trading system like ICICIdirect.com, 5paisa.com, Sharekhan.com etc. Their will be nominal annual charges. These charges vary from bank to bank but should not be more than Rs.1000 annually.
• A computer with internet connection or you can do trading in an internet cafe.
  
• After successfully opening the online account you will receive the username and password with the help of which you can login in online trading system and trade yourself.
  
• The trading system executive (with whom you opened trading account) will help you initially about how to use the online trading system.
  
• Once you get familiar with the system then you can trade yourself at your home or in the internet cafe.
  
• Nowadays you can get internet enabled on your cell (which is called GPRS) whose speed will be sufficient to do trading and also the charges of GPRS are very nominal.

Advantages of Online Trading

• No need to depend on any broker or anybody else to place the order or to square off the order. In short you are the boss of yourself to do trading of shares.
• It is reliable, convenient and you can take your own decisions yourself by actual selling or analyzing the market on the computer screen instead of calling broker all the time and getting news about the market.
• Remember the stock market always get impacted by the news, this being said it’s not possible or practical for a broker to update you about the latest news impacting or influencing the market. A broker handles many clients and you are just another client for him. However if you are doing online trading yourself, then you may save yourself from big disaster. You will get news and updates on various websites and also on your online trading system and most of the information will be free of cost.
• By doing online trading yourself, you can see and judge where market (or your stock) is heading. Most online trading websites will provide you with fundamental as well as technical analysis. The website will also provide you with latest charts and graphs which help you to take right decisions at the right time
• All your transactions and related documents can be seen online and can also be downloaded to your PC without depending on your broker. You can also check the status of your amount on daily basis through you online trading system.

Disadvantages of Online Trading

Online trading system depends upon availability of

1. A Computer

2. An Internet Connection and

3. Electricity

In online trading system if your computer breaks down or you face problem internet disconnection you cannot trade. Similarly problems such as electricity cut off will not allow you to trade in such critical circumstances you have to call trading system executive and do trading or square off your transactions.

We all are here, working hard just to make money. We should take care of few basic mantras of how we can make, save money.

Mentioned below are the basic mantras to help build wealth and retain it.

1. Set your financial goals: We know how much we earn, we can earn and we can save. We should work as per our goal and limits. Be it planning for investing in Indian stock market, buying shares, buying share market recommendations, future studies, buying a car or a laptop. Identify it and put a monetary value to it. We can achieve our goals only if we systematically save for it.
 

2. Spend lesser on credit cards: The plastic money is very convenient and most of us prefer this to actual money. Since it is convenient, we tend to over spend. We should keep in mind basic rule - 'don’t spend what you don't have’. We should try to stay in our financial limits.
 

3. Buy an insurance policy: For those youngsters who have dependents; insurance is a must. However, we generally undermine the importance because we are young. The sooner you get insured, the better. It will also work out cheaper because of the age factor. However, we should keep in mind there are many policies offering different return slabs of different insurance companies. We should do proper research before buying it.
 

4. Invest regularly: There are various options for investing your money. One of the most popular and rewarding options is to invest in Indian stock market. From share trading or stock market investments many are earning as well as loosing money. In short if you trade you may loose but if you invest you will earn. But you can earn both ways condition being you should work as per stock market analyst tips or recommendations.
 

5. Think about the Future: It is never too early to start preparing for your future, plan for your retirement now, the sooner you start the better it is for you. You will be able to see the power of compounding, when you start investing small sums of money, but still see it grow gradually to the amount you set as target.

Day trading refers to the practice of buying and selling stocks within the same trading day such that all positions will usually be closed before the market close of the trading day.

There are six common basic strategies by which day traders attempt to make a profit:

1. Trend Following,
2. Playing News Events,
   
3. Range Trading, 
4. Scalping,
5. Technical Trading, and
6. Covering Spreads.

A sell stop order is an instruction to sell at the best available price after the price goes below the stock price. A sell stop price is always below the current market price. A stop loss order instructs your broker to sell when the price hits a certain point. The purpose of the stop loss is obvious – you want to get out of the stock before it falls any further. It is one of the most difficult arts in swing trading.

A stop loss order works like this: You tell your broker you want a stop loss order at a certain price on the stock. When, and if, the stock hits that price, your stop loss order becomes a market order, which means your broker sells the stock at the best market price available immediately.
                                          

For example :If an investor holds a stock currently valued at Rs. 250 and is worried that the value may drop, he/she can place a sell stop order at Rs. 246. If the share price drops to Rs. 246, the broker will sell the stock at the next available price. This can limit the investor's losses (if the stop price is at or below the purchase price) or lock in some of the investor's profits.

ADVANTAGES:

Retail investors are most vilified set of investors. The general assumption is that they are the ‘greater fools’ as in the theory by that same name. Very unfortunately, to an extent the sobriquet is deserved.

In Indian mythology it is said that Gods get their power from the devotion of multitude. Similarly, retail investors, call them by whatever name, are the power bearers for the power-brokers. They are the ones holding the visionary torch when power brokers have safely made their way home.

Retail investors are usually the loosing side of the trade. There are some very common errors that they end up doing. I just tried to list out some common errors or bad habits that we retail investors tend to repeat.

Buy knowledge: Home-works are for kids

Most of the retail investors do not do homework on which their trades and investments are based. They expect brokers to do the work for them; after all the investors/traders are paying the broker for the research in form of commission/retainers. Unfortunately, broker has conflict of interest and to put it bluntly but truthfully, does not care about retail investors. For the broker, the investor is nothing but a trading account, no matter what the advertisement said. The Broker very well knows that before the investor blows up his account, Broker have to make maximum use of the account to earn his money. Use a part of that money for advertisements & marketing campaign and voila, Broker will have a new replacement account.

Broker does not care about retail investor. They don’t matter in Brokers’ scheme of things. Many brokers misuse the trust reposed by these investors, some are neutral and only a few are real partners in trade. In the dog bite dog world, investor can trust only his own work

Do not pass the buck. It is your trade, your profit, your loss. Stay clear of actions that are meant to blame others/brokers, every action should be independent of external variables and be based on what is important to the investor. And the end of the day you should not and you do not have any body to blame except yourself.

Easy money business: Trades first and then learn

The realization that trading/investing has to be learnt first before putting into actual practice is common. This in itself does not in any way differentiate the caliber of traders. What matters is the realization and subsequent action. For example, most of the traders after initial few losses realize it is better to learn and know a bit more about fundamental analysis and technical analysis, but it is very few who actually strive to gain knowledge or expertise in that.

As wise men in the market have told us, it is must to study how the market functions before we start our operations. As somebody said, in every business/profession, a person spends years studying that art before he reaches a stage of perfection. But in the business of trading/investing the common perception is that we can make money from the Day 1. This is not true. Like any other profession/business, stock markets need constant dedication in learning and working towards the goal.

He(a)rd on street: Get swayed by friends' or analysts' remarks

One of the common 'retail investor error' that results mainly from lack of research/homework is the trader/investor getting influenced by the suggestions of fellow traders/analysts. Since, there is no background analysis done by the investor himself, the fundamental basis of the suggestion is lost and what remains is a skeleton of a reason. Investor becomes the part of the herd, not knowing what and why it is happening, where or why it is moving. When the environment changes the investor/trader does not have a clue that fundamental basis on which the scenario/trade was suggested have changed. Ultimately, after a loss making trade, we end up blaming others when in fact the blame should be squarely be placed on ourselves.

Open-minded: Open conviction

Most of the problems arise due to lack of proper study/homework. When an investor/trader makes a trade but happens to read/hear an adverse comment relating to the trade, the investor starts to get jittery and looses composure. More often than not, psyche helps him out by giving some good reasons to exit from the trade. If such exits are beneficial to him initially, this breaking of trades when somebody casts aspersions on the trade/investment reasoning becomes a very bad habit. The trader is conditioned into a bad habit.

Psychologically, this means trader himself believes that he is not capable of coming up with good arguments for trade. Hence, he short sells his opinions repeatedly. It is must to have an open minded attitude to all trades, but the fundamental belief, the conviction for the trade must be clearly established before the trade is put through. Lacking which the trade/investment will crumble under the pressure of doubt/aspersions.

Let the breeze of thoughts blow from all direction but I refuse to be blown off my feet. – Mahatma Gandhi

Smart news: Trade news

Retail investor is always late for the trade. We can confidently say 'always' because I doubt we have a single instance where the retail investors were the "smart money" It is this characteristic of being so gullible that makes us retail investors the laughing stock.

Smart money anticipates the "news" and probably even knows it before ink meets the paper. Retail investors mostly react to these revelations and enter the trades. There are many scenarios, where trading on news-based events are possible and successfully made. For example, in foreign exchange and commodity markets the news events are very important trading points/opportunities but in equities the "news" is usually compromised facts.

Blinkers on: Watch news channels

Retail investor is a news watcher. Sad but true, retail investors’ biggest weakness is perhaps his/her total surrender of thought faculties to the talking heads on the television or experts in newspapers, a media which has been and is still being used for propaganda and subtle persuasion.

Nothing makes an investor more gullible, blinkered and fixated on an idea/theme than the constant sensationalism of the news media. The following of such media themes, of course are propaganda by the so-called smart money. Under the constant bombardment of compromised ideas, the resistance of the retail investor is finally broken, and investor/trader (usually) ends up making a bad trade.

Tips: Got a tip?

Perhaps, the most obvious sign of the retail investors is "tips". Talk to an investor and after few minutes of conversation; if the conversation veers towards tips, you are talking to a confirmed retail.

Please do not mistake me, lot of "smart money" also ask for tips or rather to put it more appropriately watch the "tips market" to get a sense of what tips are being passed along. You can be sure 'smart money' does trade on the "retail tips" as otherwise they wouldn’t be smart in the first place. Smart guys are interested in the psychological information involving tips than in the tips itself.

The simple logic that if anybody knew a confirmed move would have a large vested interest does not seem to strike many.

Immersed in market

You cannot talk to a person for a long time without conversation veering towards market. I wouldn’t classify them readily as retail investor, but certainly not as matured investors. There is a class of investors/traders for whom the market has taken over their soul. Nothing exists behind the walls of the market. Unfortunately, this only makes them less productive and closed to many trends developing, subtly. There is a class of investors who do not talk about markets in routine conversation even though they are equally involved in the market. For these classes of investors it is usually a concerted effort to avoid the talk. There are many things more important than the wall.

Stocks on fire: Head for exit

One of the main weaknesses of retail investors, in most scenarios, is that they do not sell. Wise men have said you cannot make money unless you sell. But most hold onto their favorite stock, for just one more ride. It is unfortunate the greed takes over the psychology just at the time all the profit objectives are fulfilled. No trend is perpetual and when the market turns back, the opportunity of booking the profits would have been lost.

Retail investors also do not exit at the stop losses. It is not necessary to have stop losses, but if the original plan of trade included stop losses then the discipline of trade must be followed.

And also contrary to expectations, it is not necessary to have stop loss figured out for the trade. But very essentially, the acceptable risk must be clearly defined.

House money: no problem

Another one of the bad habits of retail investors that they do not feel the pain of loosing the money. Either it is part of the "house money" or the capital. As Warren Buffet said the first rule of the game is not to loose money and the second rule is not to forget the first rule. You can make money only if you have capital, without capital or worse lost capital nothing can be achieved.

Volatile plans

A bad trading/investing habit is to exit at the first signs of profit and waiting endlessly drowned in losses.

The biggest pitfall in the market is simply, we do not know the future. No one does. Hence all approximation is nothing but an optimistic estimation of probabilities. We do not know when the trend breaks down but we can only guess; some times a very sophisticated presumption. The uncertainties of the future are part and parcel of markets. But in the case of the retail investor, the fear of this uncertainty amplifies anxiety. This

Jesse Livermore said the biggest money was not made in trading but in waiting. Probably because when the trend is established it runs for a longer time. An early exit in such rallies is usually ‘very’ early and creates a left-behind feeling which in turn leads to some bad decision making just to ‘catch up’. Retail investors are usually the worst offenders of this.

Thrill seeking: Expensive tickets

There is probably no ‘power experience’ in the world than ‘bark’ orders into the phone.
Market is certainly not a place to look for some fun. It is very expensive fun. Not a place to look for thrills. This doesn’t come cheap.

I guess it was Lord Dryden who said most of our problems are due to the fact we can’t spend some time quietly in a room. We crave for action. Markets are a very expensive place to find that.

But trading, just as any other businesses works best when it is boring. So boring, so on auto-pilot that we would rather have our nails plucked out for fun. Making money is perhaps easiest thing to do if only we could sit quiet and wait.

Holy Grail: Double circle

Every retail trader is like Indiana Jones looking for Holy Grail. The Holy Grail, the silver bullet to stardom, the key to his dreams beyond the forbidden borders entice him as powerfully as it did knights templars.

You can see him unraveling the circles of life, like leaves of onion, trying to reach the inner-most circle. Trying to reach the pool that will give him the most reliable tips lots of money, time and hopes are wasted.

Like the Grail, there is an ‘inner-circle’. Just that there is always a circle inside your circle. It should be chased, perhaps, more in the fashion of philosophy of alchemy, refining ourselves to be better traders/investors. But for all the practical reasons the chase should not take precedence over the current realities. When you grow you could find yourself in the center of the circle.

Conclusion

If you look at these reasons, just a sample of large number of bad habits, solving these habits is very easy. But it takes some effort on part of investor to solve them. First and the foremost are to learn about the working of markets, do the homework and plan out the trade, no Plan-Bs if they were not part of trade-plans. Have a bigger picture view of the market; you do not have to be 100% involved to get the most, in other words, have a plan to enjoy the benefits of trading/investing.

Foreign Institutional Investor [FII] is used to denote an investor - mostly of the form of an institution or entity, which invests money in the financial markets of a country different from the one where in the institution or entity was originally incorporated. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. It is a hot money as it can leave the country at the same speed at which it comes in.

 
The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market. One of the major market regulations pertaining to FII’s involves placing limits on FII ownership in Indian companies.

 
As per the current guidelines of the RBI,FII can invest up to 24% in a company but if they want further investment the need special approval from the company's board and in any case cannot go beyond the foreign investment cap for the sector, set by the government. Even for sectors like insurance, where the government is considering raising the foreign investment cap to 49% against 26% in present, there is ambiguity about whether FII investment should be subsumed in it.

 
FII can invest in all the securities traded in the primary and secondary market, including the equity and other securities/instruments of companies which are listed/to be listed on the Stock Exchanges in India including the OTC Exchange of India. These would include shares, debentures, warrants, and the schemes floated by domestic Mutual Funds. Government may even like to add further categories of securities later from time to time.

FII in Detail:

• An application for registration has to be made in Form A, the format of which is provided in the SEBI (FII) Regulations, 1995 and submitted with under mentioned documents in duplicate addressed to SEBI as well as to Reserve Bank of India (RBI).
  
• As per Regulation 6 of SEBI (FII) Regulations,1995, Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration.
• The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.
• For granting registration to the FII, SEBI shall take into account the track record of the FII, its professional competence, financial soundness, experience and such other criteria that may be considered by SEBI to be relevant.
• SEBI and RBI initial registration for valid for five year. Both will be renewable for similar five year periods later on.
• A registered FII would be expected not to engage in any short selling in securities and to take delivery of purchased and give delivery of sold securities.
• A registered FII would be expected not to engage in any short selling in securities and to take delivery of purchased and give delivery of sold securities.
• Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment.
• Reserve Bank of India may at any time request by an order a registered FII to submit information regarding the records of utilization of the inward remittances of investment capital and the statement of securities transactions
• FII can transfer sums from the foreign currency accounts to the rupee account and vice-versa, at the market rate of exchange.

Here are a few rules for successfully trading and investing in the Indian stock market.

If you want to be a successful intra day / day trader or Positional / Delivery investor then simply follow these rules.

Trading runs in cycles

Stock markets moves in cycles, some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly

Think in terms of probabilities and act upon them. There are no certainties in trading. You can keep yourself out of trouble by thinking in terms of probabilities. Get comfortable with approximate predictions and interpretations.

To trade successfully, think like a fundamentalist; trade like a technician

Along with economic fundamentals that will drive a market higher or lower, we must try to understand the technical as well. You need to be well versed with basic technical analyses like PE Ratio,

Understanding of mass psychology is often more important than an understanding of economics

Trading is a psychological game. Most people think that they're playing against the market, but the market doesn't care. You're really playing against yourself. Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy. Positive emotions could cause us to fail to apply risk precautions. Negative emotion could cause us to hesitate.

Learn to monitor yourself and draw conclusions from your mistakes

Predetermine maximum losses in every potential trade. Do not risk more than 5% of your capital on any trade. Don't average your losses.

Buy that which is showing strength - sell that which is showing weakness

The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to "buy low, sell high", but to "buy higher and sell higher". Furthermore, when comparing various stocks within a group buys only the strongest and sells the weakest.

Think like a warrior

We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don't need to fight at all.

When you lose, don't lose the lesson

Forget the names but remember the events. Those who don't remember the past are doomed to repeat it. Make mistakes with composure and character, without blaming others, and don't dwell on mistakes.

Evaluate your results monthly

Monitor your P&L, your win/loss ratio, and the relationship between your biggest wins and worst losses. Reviewing these results helps you continually improve your understanding of the markets and yourself.

When in doubt, get out

Scrutinize your positions at all times, each day, and you will not be left holding a stock without reason. Be willing to change direction at any time, because your flexibility as an individual investor is a big advantage which should be embraced!

Inflation is a measure of how much the general level of prices for goods and services is rising over time. As inflation rises, the purchasing power of every unit of currency is decreased as a result. Some inflation is to be expected, though countries' central banks usually try to prevent excessive increases in the prices of goods and services. One famous example of sudden, severe inflation occurred in Germany from 1922 to 1923. By some estimates, prices in Germany during this time period doubled every two days, on average. Needless to say, such rampant inflation decreased the average German's purchasing power significantly, resulting in economic disaster. This highlights the importance of inflation as both an indicator of economic conditions and as a driving force behind changes in those conditions.

Banks and other institutions that lend money at fixed rates are negatively impacted by unexpected increases in inflation. The reason for this is that at a fixed rate, the amount of money that a borrower has to pay back to the lender is essentially fixed as well. The rate that the lender charges is supposed to be enough to cover inflation and still provide some profit; the difference between inflation and the rate banks charge is called the lending spread. If inflation suddenly increases or increases more than was expected, lenders can be faced with the situation in which the money borrowers pay back, while the same in nominal terms, is much less in real terms. For example, if a bank charges 2% on a loan but inflation increases to 4% after the loan is completed, the bank will actually lose money on the loan.

 
Impact of Inflation

Banks: The profits of Banks, providing lending services to both personal and commercial customers could be significantly hurt by increases in inflation.

Mortgage Financing: Firms engaged in financing mortgages could be harmed by inflation. Higher inflation would decrease the profits on their fixed-rate mortgages.

Real Estate Investment Trusts (REITs): REITs are negatively affected by inflation as costs for mortgage and debt interest expense and general and administrative expenses could increase at a rate higher than rents.

 Effect of inflation

Inflation represents an increase in the prices of goods, as well as a decrease in the purchasing power of every unit of currency. Some inflation can be good, reflecting economic growth and the related increase in prices. Too much inflation, or unexpected increases in the rate of inflation, can be harmful, however. Inflation can hurt a variety of companies and industries, particularly lenders. Additionally, people living on fixed incomes, like retirees or the disabled, can be harmed by the reduction of their incomes' spending power. Payments from government-sponsored programs are readjusted periodically for inflation, but this often occurs only once a year. In the time between adjustments, sudden inflation can result in lower spending power for people on fixed incomes, lowering their standard of living and decreasing their consumption of goods and services. Fixed incomes from private sources, such as employer pension plans, may or may not be readjusted for inflation at all, subjecting people dependent on these payments to inflationary risks.

In addition, higher rates of inflation can cause general uncertainty about the future direction of the economy as a whole. This can lead to hesitation among individuals and corporations to spend money until they feel comfortable about future economic conditions. The resulting decline in spending would further impact the economy, hurting providers of goods and services. At the same time, rising prices often leads workers' unions to demand higher wages to compensate. This demand for higher wages, combined with the decrease in demand for goods and services, can lead to higher unemployment as firms are forced to lay off workers. Also, companies can incur what are known as "menu costs", or the costs of changing the prices for goods and services. This includes recalculating the actual costs themselves as well as updating any signs or price lists to account for the changes. While seemingly insignificant, this can amount to a significant cost across the economy.

Averaging down is a strategy to lower your average cost in a stock that has dropped in price. It is the process of buying additional shares in a company at lower prices than you originally purchased. This brings the average price you've paid for all your shares down.

To better understand averaging down lets us see how it works.

Let’s say you buy 100 shares at Rs. 50 per share, now your total investment is Rs. 5000 and cost per share is Rs. 50

Now if the stock price drops to Rs. 45 per share. You then buy another 100 shares at Rs. 45 per share, now your total investment is Rs. 9500 (50*100+45*100) and the number of shares owned by you is 200.

Hence the average price per share is Rs. 47.50 (Rs. 9500/200 shares). Hence you have averaged down your cost per share.

Now if the stock price rebounds and shoots up to Rs. 60 then you made the right decision of averaging down. However if the price goes down further then how much further to average down?

Averaging down is very risky. Here are some do’s in order to minimize those risks.

 
Strong Company Fundamentals

When you invest in a company you look at the company fundamentals, you study what’s going on within the firm and its industry and hence you are in a better position to know if a drop in the stock’s price is temporary or sign of trouble.

If you truly believe in the company, averaging down may make sense if you want to increase your holdings in the company.

 
Logically Illogical

Once you have done your homework and have come to a conclusion that the company where you have put your money is fundamentally a good company, you should see if the stock price fall is rational i.e. logical or illogical.

Ideally if the company fundamentals are strong the reason for the fall in stock price must be irrational. For example let’s assume that you are invested in a hatcheries company and the stock price of that company has come down. Now your homework tells you that the company holds a strong fundamental position also the sector in which it is operating is booming.

The only reason the stock price has come down is because of bird flu scare (irrational reason). In this scenario it makes sense to average the cost down because people cannot permanently stop consuming poultry products also the bird flu scare is a temporary phenomenon

If price is down because the industry has been made obsolete (logical reason), don't average down as the industry is facing some big problems (eg: pagers, CD manufacturers etc.)

 
Upside Potential

Once it's made sure that market price is down because of some irrationality, how soon can market realize that it was being irrational? Hence upside potential is how much time it will take for the stock to rise to its previous high levels and rise higher.

Don't trust others opinions

It's your money at stake, not theirs. Do your own analysis, regardless of the information source.

Don't believe in a company

Trading is not investment. Remember the numbers and forget the press releases. Leave the American Dream to Peter Lynch.

Don't break your rules

You made them for tough situations, just like the one you're probably in right now.

Don't try to get even

Trading is never a game of catch-up. Every position must stand on its merits. Take your loss with composure, and take the next trade with absolute discipline.

Don't trade over your head

If your last name isn't Buffett or Cramer, don't trade like them. Concentrate on playing the game well, and don't worry about making money.

Don't seek the Holy Grail

There is no secret trading formula, other than solid risk management. So stop looking for it.

Don't forget your discipline

Learning the basics is easy. Most traders fail due to a lack of discipline, not a lack of knowledge.

Don't chase the crowd

Listen to the beat of your own drummer. By the time the crowd acts, you're probably too late…or too early.

Don't trade the obvious

The prettiest patterns set up the most painful losses. If it looks too good to be true, it probably is.

Don't ignore the warning signs

Big losses rarely come without warning. Don't wait for a lifeboat to abandon a sinking ship.

Don't count your chickens

Profits aren't booked until the trade is closed. The market gives and the market takes away with great fury.

Don't forget the plan

Remember the reasons you took the trade in the first place, and don't get blinded by volatility.

Don't have a paycheck mentality

You don't deserve anything for all of your hard work. The market only pays off when you're right, and your timing is really, really good.

Don't join a group

Trading is not a team sport. Avoid stock boards, chatrooms and financial TV. You want the truth, not blind support from others with your point of view.

Don't ignore your intuition

Respect the little voice that tells you what to do, and what to avoid. That's the voice of the winner trying to get into your thick head.

Don't hate losing

Expect to win and lose with great regularity. Expect the losing to teach you more about winning, than the winning itself.

Don't fall into the complexity trap

A well-trained eye is more effective than a stack of indicators. Common sense is more valuable than a back tested system.

Don't confuse execution with opportunity

Overpriced software won't help you trade like a pro. Pretty colors and flashing lights make you a faster trader, not a better one.

Don't project your personal life

Trading gives you the perfect opportunity to discover just how screwed up your life really is. Get your own house in order before playing the markets.

Don't think its entertainment

Trading should be boring most of the time, just like the real job you have right now.