Steven “BigBeat” Orr, Senior Vice President at Benzinga and a trader with 27+ years of experience, has shared the set of rules he follows to find success in the market. These rules are great whether you’re a new trader or have been in the game for a while. These rules provide a base for traders who are trying to improve their current trading strategies, or develop a new one.
1. Read the book One Up On Wall Street By Peter Lynch
One Up On Wall Street provides a look into Peter Lynch’s background and what he’s done to be successful. Lynch worked his way to the top at Fidelity. There, he became a powerful and successful trader. Throughout his years of working in the market, Lynch gives insight into trends, things he has learned, and what to stay away from. Whether you’re a seasoned trader or new to the game, this book is a must read.
2. Trade What You Know
This rule means that you should trade what you understand and are familiar with. If you have a background or know a lot about a certain subject, trading those stocks will often lead to higher success because of the knowledge you hold. Although learning about new markets and stock is exciting, doing research and fully understanding the subject of interest will allow you to make the most knowledgeable trades and investments. Some markets are extremely unpredictable and take a new level of understanding so trading what you know, especially starting out will allow you to leverage the market.
3. Everyday is a New Opportunity
Winning and losing is part of the game. Being prepared and staying on top of the news will help you make the most educated moves. Losing on a trade is not the end of the world. There are always more opportunities to win as long as you put in the work to set yourself up for success. Doing research and staying up-to-date with markets around the world will allow you to make the most informed trades at any given time. If your thesis doesn’t play it like you intended, move on and try again the next day. Don’t let loses deter you from making trades.
4. The Market Doesn’t Start at 9:30
One of the things BigBeat does to be successful is waking up early and preparing for market open. Markets across the world do not have the same hours as the US market, so news catalysts can happen while we sleep. Watching the news, listening to Squawk, and having the Benzinga Pro Newsfeed running are a few things BigBeat does to be prepared and set himself up for success. Staying current with all news is really important. Being up early enough to do your pre-market research and getting all of the news you need is important to start your trading day strong. Getting into a routine will help you wake up and get prepared especially if you’re not a morning person.
5. Have a Thesis
Having a thesis is another way to set yourself up for success. A thesis is the reason why you’re making the trade. Whether it’s buying, selling, or considering options, having a thesis can help your trading strategies. BigBeat strongly suggests to always monitor and revisit your thesis because if it is no longer true or your position starts to change, it’s time to discontinue your thesis. If your thesis doesn’t play out how you planned, it’s okay. Make a new one and start over. Having a thesis is a really important part of any trading strategy. The more you utilize theses, the easier it will be to develop new ones.
Read more: How to Build a Trading Thesis
6. Learn Technical Trading
Having some knowledge about technical trading is a must to understand the stock market. Technical trading is when numbers and statistics are the reasons why stocks are moving, not the news. Looking at historical trends, gaps, and finding any patterns in the market will help you with your technical trading techniques. Technical trading is strongly related to supply and demand. Japanese candlesticks are used in technical trading as indicators of movement. They are also used to analyze trends in the market. Japanese candlesticks are used on a chart or graph to make the easy to read.
Read more: Beginner’s Guide: Technical Analysis
7. Time is Your Best Friend
Timing of trades and moves is really important to successful day trading. If your position hasn’t moved and your thesis is holding solid, you can allow your thesis to play out and leverage the movement. Understanding the timing of your trades and following news trends allows you to have the insight to get out when you need to or allow the market to play into your hand. Timing provides the possibility to make the biggest profits on your trades.
8. Don’t Be Greedy, Take a Profit
Don’t let your losers get too big and your winners not big enough. BigBeat says that if your thesis is complete and you feel you got the most out of that stock, take the profit and then move on. Making a profit is better than making no profit at all. If you don’t get out while you are ahead, sometimes the market can take a turn and your profit might be gone. As long as you’re staying within your daily goal, taking the profit will always be in your best interest.
9. Set a Daily Goal
Whether it’s $100 or $5,000, having a goal is important because it helps to motivate and keep you on track. If you don’t hit your daily goal on a particular day, it’s okay. Accept it and move on. Setting yourself up for success can help you get to your goal and potentially beyond it. Do your research and play the market. If you’re new to trading, setting a daily goal allows you to make moves within your comfort zone. This helps you to learn and develop your own strategies to help you meet your goals.
10. Learn To Leverage
BigBeat recommends starting small and working your way up to owning big. If you’re moving into a new position, its best to take it slow rather than go in full steam ahead. If it’s doing well, you can buy more and help push the position up. Researching market trends will help you understand when to purchase more to get leverage on that position.
11. Options Aren’t Scary
Over BigBeat’s 27 years of trading, he has learned that options are very valuable and aren’t as intimidating as they seem. Each option has 100 shares that could potentially help you leverage. Options allow traders to profit in all markets because of the security that the expiration date of the contract provides traders.The contract is a predetermined price that the investment can be sold at. When trading options, you are not buying any actual ownership in a company.
Read More: How to Understand Option Alerts
12. Always Have Powder (Cash)
Trading on margin will help you leverage the market and find new ways to have powder. Powder is another word for cash that is frequently used while trading. BigBeat recommends always having cash ready because the market us sometimes unpredictable and you never know when you’re going to need to make a move.
13. The Whole World Matters
There are many factors and reasons why the US market moves. The US exports and imports a vast majority of items and that plays a big factor in the market. For example, if there is an issue with a commodity like cotton to make clothing, it’s going to affect stock that is traded here. Staying up to date with news and current events is a good way to get insight on what’s going on around the world.
14. The Market Never Sleeps, But You Should
BigBeat says that getting an adequate amount of sleep and being prepared so you can stay awake and alert while trading is important. During the week traders should go to bed early so they can wake up early and get their trading day started well before market open. Treating trading is like a job that requires punctuality and attention to detail. There are many movies and TV shows that give the impression that traders party hard all of the time, but that isn’t always real life.
15. Admit Mistakes
Making mistakes is okay as long as you learn from them. Own it and move on. Blaming the mistake on other things or people won’t help you in the long run. Mistakes are a fact of life, everyone makes them. Understanding why a situation or event was a mistake is important because it allows you to analyze what you did wrong and how you could improve the next time. Admitting mistakes allows you to take ownership over your learning and decisions.
16. When a Trade is Over, Move On
Have a solid thesis. That is the backbone of trading. When the trade is over, no matter if it worked in your favor or not, accept it and move on. Being emotional over your trades will not help you leverage the situation. After you make your decision and thesis, stick with it and move on. Don’t chase the stock or wait for your thesis to come back to you. There are always other opportunities.
17. Hope Is Not A Strategy
BigBeat says that hoping a trade will work out in your favor is a good way to lose money. Having a thesis and believing in it will help you figure out what your next move should be. The market is powered on trends, numbers, and money. Hope doesn’t hold any ground in the world of trading, according to BigBeat.
18. Always Have an Exit Strategy
If the stock isn’t doing well and your thesis is no longer viable, that’s a sign to exit the position. Knowing when to get in and when to get out is key. Make sure to pay close attention to the market and always remember your daily goal.
19. Don’t Chase
Don’t overthink your move. If you want to be in a certain market, just get in, but have a solid thesis. When you chase, sometimes emotions kick in and enable you to get caught up in the market. In that event, you’re not playing the market, the market is playing you.
20. Don’t Be Afraid to Sell Your Losers
Don’t let a few loses hurt your mentality or portfolio. Get out and move on when a trade isn’t working out the way you thought it would. Holding onto a stock, especially if it is not working in your favor is never smart.
BigBeat’s favorite saying is “If the market doesn’t humble you, then you ain’t playing it.”
Being in the market is the only way to actually make money in the market. If you make a bad trade or it doesn’t go as planned, move on and try again. The more you trade, the more you learn. Getting familiar with market trends and different positions is only going to help you leverage the market and play it in your favor.
BigBeat’s set of 20 rules have helped him, and other traders, gain success over the years.
Whether you’re just starting out with trading or you just want a little advice, these rules are a good starting point to build your strategy. Personal development and continuous learning is always helpful and helps you stay current and on the cutting edge.