1. Develop a system that works for you, and STICK TO IT!
To trade successfully, you must have a system. I know most of us have heard this many times before, but this step is so vitally important, it is well worth repeating. Develop your system and stick to it like glue! Before you ever enter a trade, you should already have your expectations for the stock laid out, as well as your entry and exit points. Then, stick to the plan!
2. Know how to read the chart: A little bit of technical analysis never hurts.
Some technical indicators are fairly easy to understand, such as support and resistance levels and 50-day or 200-day moving averages. However, it’s always a good idea to have more than one trick up your trading sleeve. Some other good indicators might be Bollinger Bands, the Stochastic, or the MACD.
3. Cut your losses.
Know when to get out. This once again takes us back to our system. When you enter into a trade, you should always enter with an expectation in mind (what you think the stock is going to do). However, just as important (if not more) is to have your exit strategy planned, should the trade go against you. Prepare yourself not only to take your profits, but also to cut your losses. You are much better off taking a small loss now, rather than risking an even bigger loss later on.
4. Control Your Emotions.
Most professional traders will tell you that the single biggest factor in being a successful trader is to take control of your emotions, rather than letting your emotions take control of you. This rule can be a difficult one to master; if a stock is moving in your favor, it can be hard not to get excited, and if a stock is moving against you it can be even more difficult to not get upset. However, if you have laid out your strategy and your exit points, you have nothing to worry about—so take your emotions out of it!
5. Don't get greedy.
When you’re holding a position that has done everything you expected—and more—it’s very easy to get greedy. Always watch the signs as to what the stock is doing, and be prepared to take your profit and run. It’s always a better idea to get out around the top and make moderate profits than to exit too late and take a loss. Remember, we’re traders, not gamblers.