Good trading generally entails getting smaller when things are going bad and getting bigger when things are going well. A sure sign of a losing trader is one who is generating margin calls on days he or she is losing money. If you buy a stock and things are going your way, then consider buying other stocks. Perhaps your timing and general read of the overall market is right today. However, if stocks you are trading are not moving in your direction, then do not add to your positions. Look to get smaller. In general, you need to make as much money as possible when the opportunity is there and lose as little as possible when the opportunity is limited. There will always be other opportunities. Remember, trending markets and stocks have more potential than sideways or choppy markets for non-market makers.
Limit your losses. Only you can determine what is right for you, but whatever you decide, make sure you stick to it. Many traders limit them selves to one or two levels, at the most. This means that in a stock that is a quarter of a dollar wide, they do not let themselves lose more than half a point. While this might not seem like much, any more can add up quickly. Remember that you are a trader and not an investor. Set a limit on what you are willing to lose per trade and also per day, and make sure you stop at this point. Another good stop point is likely to be the point at which you find yourself hoping or wishing. This is a good sign to get out. Do not let yourself get married to a position. Recognize that every second of every minute of the trading day there is another opportunity. There is no reason to insist on being there when a stock in which you have taken a beating turns. Do not let one bad day or a bad position ruin a week or month or even a year of hard work. I have seen this happen. Perhaps the most important rule I've ever learned from trading is never to take home a losing position. Sure stocks come back sometimes, but in the long run this rule is a must: Do not take home losers.
Take home winners. Winners are generally good to take home, and in the long run this will prove profitable. In fact, some traders build a whole career around taking home other peoples winners. They do this by buying stocks in the last hour that are up on the day, that are trading on good volume, and that go out strong. This strategy tends to work because the market makers in these stocks usually are forced to go home short. With this in mind, any buying pressure at all the next morning will generally push the stocks higher, while selling pressure can be absorbed by the market makers covering their shorts. A few words of caution here: Overnight trades equal higher risk and therefore higher returns. Be respectful of earnings releases, expected news, or the potential for unexpected news. Barron's lists some of the upcoming earnings. Also, companies will generally tell you their earnings release date if you care to call them. In addition, be care ful with options and futures expirations. They can cause unusual moves that tend to reverse the following morning. Expirations and their effects are generally scheduled for the third Friday of the month, but sometimes positions can be unwound earlier.