Tips

Trading tips

Every tip takes a side. The blunt ones push you toward a habit; the weighed ones set two approaches against each other and tell you what would decide it for you.

Tips

Plenty of these are about orders and stops, because that's where money leaks out of an account without anyone noticing. Others deal with records, rules and screens, since most trading mistakes are made by someone who knew better at the time. Where numbers help, a tip works them out, and every one of them says where its advice runs out.

Run any sum on these pages again with your own account size and prices before you act on it. The trading terms explain the plumbing the tips assume, and the questions cover what to do when an order surprises you.

T01

Your Broker's Default Order Settings Are Choices Made for You

Go through every default on your order ticket and account once, deliberately, because each one is a decision with consequences you inherit. T02

Pick Which Tax Lots You Sell Before You Click Sell

When you hold several lots of one stock, choose the lot before you sell, because the default method may not be the one you would pick. T03

Close Social Feeds Before the Open and Keep Them Closed

Social feeds should be closed for the whole trading session, because they replace your plan with other people's conviction. T04

Gaps Do Not Have to Fill, Whatever the Saying Claims

A gap fill is one possible scenario, to be traded with a stop and a time limit, and a news gap may never fill at all. T05

Hide the Dollar P&L While a Trade Is Open

While a trade is open, watch it in multiples of your initial risk or as price against stop and target, and keep the dollar figure out of sight. T06

Keep a Record of the Trades You Chose to Skip

Log the setups you pass on, with the reason and the outcome, so you can see whether each filter saves you money or costs you. T07

Mental Stops Fail at Exactly the Moment You Need Them

Put the stop in as a resting order, because a stop kept in your head relies on you acting at the moment you are least able to. T08

If You Can't State the Trade in One Sentence, Skip It

Every discretionary trade needs a one-sentence thesis naming setup, reason, invalidation and exit; if you cannot write it, do not take the trade. T09

Options on a Stock Are a Different Trade From the Stock

A call on a stock is a separate trade from the stock, because it adds time, a strike and implied volatility to the directional view. T10

Run a Pre-Trade Checklist Even When It Feels Beneath You

Checklists catch the dull, expensive errors, and experience makes them more necessary, so run a short one before every entry. T11

Treat a Price Alert as a Prompt to Check Your Plan

A price alert means a level was reached and says nothing about whether the setup still holds, so treat each one as a cue to run a written plan. T12

Round-Number Stops Sit Where Everyone Else Put Theirs

Place a stop where the trade idea is proven wrong, plus a buffer, and size the position to that distance. T13

Scaling Out Feels Safer Than It Pays, So Test Both Exits

Scaling out can pay less than holding for the full target, and the only way to know which suits you is to measure both in your own trades. T14

Share Price Tells You Nothing About Whether a Stock Is Cheap

Share price alone says nothing about value. Market cap and valuation ratios do, and a low price mostly changes your costs and your risk. T15

Short Selling Is a Separate Skill From Buying Stocks

Shorting shares the chart of buying and little else, so a trader who buys well should learn it as a separate skill, with smaller size. T16

Buying the Dip Works Differently in One Stock Than in an Index

A dip in a broad index and a dip in one stock carry different risks, so each needs its own questions before you buy. T17

Small Caps Can Halt, and Your Stop Cannot Help During One

A halt freezes all trading, so a stop cannot protect you through one. Size small caps for the gap on the reopen, as well as the stop distance. T18

Start in a Cash Account and Let Settlement Slow You Down

Newer traders should start in a cash account, where trading only settled money forces a pause that curbs overtrading and removes margin risk. T19

Trailing Stops Look Better on Old Charts Than in Live Trading

Trailing stops work when the trail is wider than the stock's ordinary noise, and a trail chosen by eye from old charts usually is not. T20

Watch Twenty Stocks Well Before You Scan Two Thousand

Knowing how a small set of stocks usually trades is worth more than a scanner full of names you have never watched. T21

After-Hours Prices Are Thin, So Weigh Them Lightly

Extended-hours prices come from a thin market, so read them as one rough data point and trade them, if at all, with limits and smaller size. T22

Write and Change Your Rules Only When the Market Is Closed

Rules edited mid-session are edited by your mood, so change them only after the close, in writing, effective next session at the earliest. T23

Dividend Capture Strategy: How It Works and What It Costs

Buying just before the ex-date to collect a dividend mostly trades a price drop for a taxable payment, so it only works when something else is in your favor. T24

Dividend Capture in an IRA: No Tax Bill, Same Price Drop

An IRA removes the tax drag from dividend capture but leaves the ex-date price drop and the trading costs, so the trade still has to work before tax. T25

Dividend Capture With Options: Covered Calls vs Puts

Options can hedge the ex-date drop in a dividend capture, but the market prices the dividend into them first, so the hedge mostly moves the cost around. T26

Dividend Harvesting: Rotating Ex-Dates for Income

Rotating through ex-dates one after another harvests turnover more than income, so a buy-and-hold dividend portfolio usually leaves you with more. T27

Does Dividend Capture Work? Where the Payout Goes

Dividend capture rarely works as advertised, because the share price gives back roughly the dividend on the ex-date and costs and taxes take the rest. T28

Gap Down at the Open: Rules Before You Sell

A gap down is a decision you get to make once, so make it with rules written before the open, not with the first red print.