While there is definitely no official rule book for best practices on the stock market, if you truly want to get involved in the best trading, then you should develop your own system for best practices when placing trades. This isn’t a very difficult thing to do, and you need to create these guidelines so that you follow rules which will allow you to make money or minimize the damages of a bad trade.
The first thing you need to do when creating a system of best practices is think about how much you are willing to risk on a trade before you have to sell the position at a loss. If you want to minimize how much money you lose, then you need to set a standard and stick to it on every single trade. This is the only way that you are going to guarantee that you do not get creamed on a trade that doesn’t work out right.
The next best practice feature that you should probably put into place are stop losses. A stop loss is a way for your shares to automatically trigger to sell if the price of the stock reaches a certain point. Say you buy a stock at $44 per share, and you are only willing to risk losing one dollar per share. So if the stock price goes down to $43 per share, then an automatic trigger will take place and it will sell the stock for you to minimize your losses.
The final best practices piece of information I’d like to share with you is your overall trading system. You need to either adopt somebody’s trading system that you like, or create your own trading system. Once you have that in place, you need to stick to it like glue and follow it to the letter.
This is the best practices that you need to put in place if you are going to do the best online stock trading possible. So think about some of the things I mentioned, and figure out a way to incorporate them into your trading day.