RULES FOR SUCCESS
1. Never jump into anything new expecting to be good at it. This is especially true with the stock market and buying stocks vs buying options. Leave your ego at the door and have a plan for everything you do. Don't make decisions without reason. The stock market doesn't care about you just as you shouldn't care about individual stocks. Do not get too attached to any stock as doing so can break your heart, and your account if you are not careful.
2. Do NOT ever put all your eggs in one basket. This is one of the worst mistakes you can make as a new investor and this can completely wipe your account out before you know it. Diversify your portfolio and take small positions to minimize risk. Try playing each stock or option play with no more than 10-15% of your portfolio value.
3. While it is very important to leave your ego at the door do not forget to also leave your emotions there too. Another new investor mistake made often in the stock market is allowing your emotions to control your trades instead of YOU controlling them. As an example lets say you recently got out of a bad trade and want redemption so you buy some calls on stock XYZ. Without thinking, you bought at the top and the price of the stock immediately dips which in turn puts your contract in the negative. In frustration without THINKING you panic and sell. You just cost yourself money because of your emotions.
4. Always have a plan. Before entering a trade make sure you are actually entering it with reason, not because it was simply alerted. Stocks move around on so many factors and what might be a good call at that very moment might not be five minutes later. This happens but if you are prepared ahead by having a game plan you can minimize risk greatly. Minimize risk, maximize gains!
5. Do NOT take advice from just anyone and everyone. This is a rookie mistake that happens often. You see people asking if they should buy or sell a stock and they receive answers from people who don't really know. These people are ones who just say yes or no based on the opinion of others at times. While this is not always true no one can truly predict what the market will actually do. It is okay to take advice but only do so from someone who knows what they are talking about. Someone you trust most.
6. Do NOT worry about comments made on news feeds of your favorite broker or "Stock Twits". Traders get on these to attempt to influence you to push the stock in their favor. The only feedback you need to be attentive to is the analytical part of the stock and current news in regards to that stock, but never go off of news alone. Many times the market already knows and has adjusted the price accordingly by the time you hear it.
7. When creating your plan and doing your due diligence make sure you are backing it up by knowing what to actually look for when making any decision to buy or sell. Look at the charts, indicators and use your personal strategy to increase your potential for maximum profit before you even enter a trade.
8. Positioning is everything in this game. Study on how to get good positions from our resources and books we provide. Never chase a stock as more often than not when you actually catch up it, it will simply be too late. Chasing is a terrible strategy and can cost you more than you think. When you have positioned yourself correctly and are bought in to an option or common stock protect yourself by setting your position to be sold off automatically with either a stop loss or a limit sell. It is a excellent strategy to use stop losses if you can not watch your positions all day but want to minimize the risk of losing big money on them. Try setting a stop loss at 15-20% below where the stock is trading. When buying and selling always use the "limit order" option so you get a better fill price. When you use "market order" you will always pay more and receive less because its attempting to fill your order immediately.
9. Never take too many positions at one time. Some stocks can be very volatile and if you have ten different options contracts going at a time it can be hard to manage them all efficiently. When starting out try to manage two to three at a time. Once you get better you can then attempt to manage four to six at once.
10. This is the most important rule of all of the rules. Before starting out on trading stocks and options learn by paper trading which means buying into them with play money. This will help you to learn how it all works while visually showing you how fast you can profit or lose your whole account. Play with this money as if it were real and trade as if this was the market and not simulation. You will find a few weeks of a hands-on approach will help you to get over a big learning curve if you have issues with learning by watching videos or reading.
(You can trade options using play money which is called Paper Trading on the ThinkorSwim platform by TD Ameritrade. They have an app for both desktop and mobile.)