Don't trade stocks inconsistently. Don't depend on gut feel, hunches, or whims. You must have a fully developed stock trading system. If you don't have your approach fully documented, where performance can be evaluated and rules tweaked, then you do not have a real trading system.
Your system should be written in such detail that another trader would be able for understand your system just by reading the rules - without an explanation.
To have an edge, and make money consistently, you need to have a precise, well-thought-out, set of rules that you can apply during any market condition. If your system is inconsistent, and depends on your gut, then you may do one thing during a trending market, but you may do something different under choppy market conditions. If this occurs, it becomes very difficult to determine if your trading will make money over time.
Your system should be written in such detail that another trader would be able for understand your system just by reading the rules - without an explanation.
To have an edge, and make money consistently, you need to have a precise, well-thought-out, set of rules that you can apply during any market condition. If your system is inconsistent, and depends on your gut, then you may do one thing during a trending market, but you may do something different under choppy market conditions. If this occurs, it becomes very difficult to determine if your trading will make money over time.
If, on the other hand, you applied the exact set of rules to a trending market and to a choppy one, you may find that, for every dollar your system earns in a trending market, it loses 45 cents to choppy conditions. In this case, you have a net profitable system.
It is also important that you understand your system's edge. Why does it make money? What basic market principle is it exploiting? Is it designed to capitalize on trends? Capture dividends? Buy low and sell high? Scalping? If you can't identify your system's edge, than its performance could be a matter of chance.
If your system adds no value to the market place, then there is no reason that the system will continue to make money.
