In a world of never-ending lists, I figured why not make one of my own?  I am pretty sure, in the next 5-10 years, all writing whether it be factual or fictional will just be pages of lists.  That way everyone can read the first couple points on each page, make an incorrect inference, and form an opinion that misses the point of the list.  But I digress…

So for MY list, I wanted to lay out 4 concepts I am currently actively following while trading.  These are just loose concepts that help me follow some rules when I am making plays.  And yes it’s beginner crap, but its still stuff I didn’t know when I started adding portfolio positions.

1. Average INTO your positions. I used to just blanket plop down an allotted amount on a particular play, which is really dumb when you think about it. Averaging into a position helps smooth out that crazy volatility that you fight daily.  It also lets you think about whether your making a smart play if the primary or any other trend goes against you before you’ve put your chips in that basket.

2. Monitor your portfolio beta. If you don’t know what Beta is, look it up and learn about it.  Its simple to understand. Its a correlation of sorts to the S&P500 (really whatever underlying you want). If the S&P is going up or down, how is your money going to react.  REALLY helps you understand where you might be on a daily basis by taking a quick glance at the SPY.

3. Speculate smartly. It’s sort of an oxymoron to say something like that, but it’s important. Start to watch how stocks react to events. Ask yourself twice (or 3 times) if you want to go along with the trend of what the crowd is betting on.  I have been burned many a time on this.  Just overall be smart and play low limits when making these bets, that’s all I can say.

4. Sell insurance. I’m at the fledgeling point of my career in this, but I have added it as a tennant of my portfolio.  I have shaved off about 20% of my money to put to work in selling index spreads with defined risk. Its a complicated topic, but there is much to be gained by getting into this game.  It adds an income stream of some sort by collecting premiums from those that are hedging bets. No better way to define it.

So there you go, some of my stock trading principles. Be waiting with baited breath for my next list.