Be Patient - You do not have to place a trade if there is not one to be made. Do not force a trade or break your rules because you do not have a trade to make. There will always be tomorrow.

 

Play the Trend - It is one thing to be a contrarian and another to be just stupid and make a trade against the flow of the trend. It is always easier to play what the market is telling you vs trying to guess tops and bottoms and turn arounds. If the trend is bullish play bull strategy trades; if bearish, bear strategy trades.

 

Money Management - Use money that you can afford to lose. Personally only 20% of my option trading account is in any one credit spread trade and that account is only 10% of my entire investment portfolio. And if I were to play a riskier trade such as a straight call play I would use less than 10% of my option trading account.

 

Risk Management - Don’t gamble with your trading account. Use strategies and trading plans. Know what you are going to play, how you are going to exit the trade in the case of a win or a loss, know how much loss and how much gain you are willing to accept, do not swing for the fences with every trade, a reasonable gain on a consistent basis is best. Or in other words slow and steady wins the race. Avoid earnings announcements and other high volatility situations such as judgements and FDA rulings and possible mergers that can go either way, because sometimes even if your right the stock does opposite of what you think should happen.

 

Stick with your Rules - When you make a plan stick with it. Now I do not mean if your plan is obviously flawed not to change it but rather when you set a stop loss leave it and don’t regret it if it hits your stop and then bounces back. Just place your rules and stick to them because for every one time that it does bounce back from your stop there will be 5 times that it doesn’t. Map out a plan for each trade just as I stated in Risk Management and then follow that plan do not give up the plan, stick to it no matter which way the trade goes, changing the plan in the middle of the trade can lead the beginner into some serious losses, heck it can lead experienced traders into some serious losses. And most of the time the plan is changed based on the emotions of fear and greed rather than risk or money management. One other point is if you are losing do not keep throwing money at a bad strategy, go back and paper trade until you have the strategies worked out and are winning consistently, then start back into trading with real money.

 

Those are the five rules and if you stick with those five rules you can beat fear and greed, control your emotions and placing winning trades consistently and limit your losses consistently.