Small Cap Investor: How to Succeed in Any Market

January 23, 2019, By fierceinvestor,

Anyone can trade a stock.

But to trade a stock well, you must have discipline and know key rules.

To begin, no matter your skill level, all investors must understand these key principles:

  • To succeed in the market, you must develop a healthy relationship with it.
  • You cannot allow emotion to control your risk.
  • Know what the risks are before you proceed. Defining risk is critical.
  • Develop a low stress plan going forward. Remember to look before you jump.
  • Always be informed and educated before jumping into any stock or option.

Also, know where you stand right financially and with your own goals.

  • What are your goals?
  • What can make an investment unsafe, a real speculative gamble for you?
  • Are you an investor or a trader?
  • Where do you stand financially? How much money are you spending a month? And how much do you honestly have to put towards investments each month?

Once you understand those, you can become successful.

Then, once you identify your risk, you must also begin to look at money management – the most important tool in any investor’s arsenal.

Without any sort of money management, you’re throwing money around without a care in the world if you lose it or not.  It defines your overall risk.

How much are you willing to risk per trade, for example?

Since none of us have a crystal ball, we don’t know with 100% certainty whether our next trade is a winner or a dud.  So, why bet the farm when you can’t afford to lose the farm?

None of us can afford to do that…

If I knew that 7 of my last 10 trades would be a winner, but I didn’t know which ones, how would I allocate my capital risk?

Once I know my personal risk equivalent, I can lay out a game plan.

You should also be familiar with stop losses, or a price trigger that protects you in case of falling stock value. It’s an insurance policy that will protect you if the stock falls. Some traders use a -25% stop loss for example. If the stock falls 25% from your buy-in price, the stop is triggered and the trade is over.

You should also be familiar with a trailing stop-loss, or the order given to a brokerage to sell a position once it drops by a certain amount or hits a certain price level.

Trailing stop losses are essential in today’s trading environment.

Success is not a guarantee

If you want to be a millionaire, that’s great. I wish you all the luck.

But you will not become a millionaire if you don’t the time to learn, understand, practice or take the time to develop a plan for whatever known or unknown out there.

Trading successfully has nothing to do with the “perfect strategy” – which doesn’t exist.

It’s about the rule you abide by with each trade. Remember, any one can trade a stock. But it takes discipline and defined rules to trade that stock well.

In developing your plan, here’s another potential unknown.

  • Pros also know when to just walk away from a trade.
  • Lower your expectations. Inexperienced traders expect to quit their day job and get rich overnight. That’s not going to happen. No one ever became a brain surgeon or rocket scientist their first year in.
  • Remove all emotion from your trading.
  • Never wait to take profits… If you have good profits in hand, take them.


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