William J. O’Neil’s 10 trading principles that made him a fortune and a legend:
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He sells a stock he is holding after it has gone down 7% from his purchase price.
“I make it a rule to never lose more than 7% on any stock I buy. If a stock drops 7% below my purchase price, I will automatically sell it at the market – no second-guessing, no hesitation”
One of the major keys to his profitable trading was only having small losses when he was wrong.
“The whole secret to winning in the stock market is to lose the least amount possible when you’re not right.”
In trading less is more, less activity generally leads to more profits and smaller positions sizes leads to better odds of keeping profits over the long term. Less activity in trends allows an easier way to make money. Less position size leads to smaller losses when wrong.
It is better to specialize in trading, pick a market, pick a method and master it. It is better to be a master of one set up, pattern, stock, market, or system, than to dabble in many.
Things A Trader Needs to Give Up if They Want to Make Money:
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Give up your need to be right: The market is always right, don’t strive to be right in your predictions and opinions. Strive to go with the flow of the market.
Give up control: No matter how long you watch a live stock stream, you have no power over the movements. Save your emotional energy by not trying to cheer on your positions and get wrapped up in every price tick.
Trading the price action as it plays out has a better odds of putting a trader on the right side of the market than a trader with a bunch of opinions and predictions.
Backtested signals that worked in the past have better odds of success in the future than guessing which way the market will go.