Read - Safe Mode Stock Trading

One good thing to do during this preparation phase is to practice trading but not in real. This means that you will be trading stocks without using money, just for the sake of practicing only. All you have to do is to pick a stock you've chosen for some certain reason and imagine that you are buying a certain number of shares in that stock at today's market price and watch for moves the price makes over time (days, weeks, ... etc) then liquidate (sell) your position when you feel it is time to, and calculate your profit / loss. You can make your game more advanced by limiting yourself to a certain amount of money as your initial investment and work according to it. You can also train yourself to sub-allocate your investment, by buying shares of ABC Company with 20% of your investment then proceed to buy XYZ Company with 30% of your investment and so on.

This game is very useful for several reasons:

• You are not investing real money here, so you are not exposed to real money losses.
• It improves your market sense.
• It will help you in training yourself how to work within limits (i.e. your principal investment), thus will teach you how to manage it more properly.
• It will help you to test if the knowledge you have gained and the information you have collected had resulted in good decisions.
• This might continue in the future, even if you are really started to trade stocks. This is helpful to test your sense about new stocks that you still don't want to risk your money with.

Once you have established your own standards, which need to be reasonable and acceptable to you, you will need to get disciplined to them. Always have a self-discipline attitude and always refer back to your standards. Do not get tempted with others' opinions and behaviors. Several thoughts and information might affect your judgment and drive you away from your standards, thus, away from the plan you have put for yourself.

Your standards should be viewed as the control mechanism that would enable you to achieve your goal, which is to maximize your capital in a safe way. Staying disciplined means that you are still on the right track that you have designed at the beginning, any early deviation means that you have started to roam.

Standards should be looked at easily and should not be complicated. For example you can set a minimum acceptable monthly return, which should be higher than interests and other returns on other substitute investments. If you had attained this goal one day then you can liquidate your shares and enjoy what you got. Why not, since this was your goal from the start? It is safer to get them in hand rather to risk them for a longer period.

You can set a standard for a way-out, a limit for a stop loss (say 5%, for example). You should accept loss the same way you accept profit. But in order to minimize your losses you will need a stop loss standard. Keeping this in mind will keep you away from further losses, because if a share's price trend moved against you how can you tell when the trend is going to stop and reverse back. Just accept the minimum loss, it is definitely better than a maximum loss, a minimum loss can be recovered easily from other profits, but it will take you longer time to recover a huge loss.

Having standards means you have them to be followed. Do not get tempted when you find a new method. Trial and error should be minimized in such investment, because it will cost you money. For example if you are thinking of breakeven as a way-out of a stock (i.e. to buy some additional lots of a certain down-trending stock at lower prices to breakeven later), remember that the risk is increasing, flexibility are decreasing and you will be locking yourself for a longer period of time. So why should you risk more?

Staying strict to your standards will always give you more flexibility. With a stop loss limit you can get out of a position faster, this means that you have saved your time, and you will recover the realized minor stop loss faster. Think also of the opportunities that you will miss if you kept holding your losing position.