When it comes to the stock market a trader should meet buying with selling and vice versa. Considering stocks on an intra-day basis the stocks will only go so high, or so low, prior to attending to draw the next group of intellectuals. It happens many of times that masses get panic and react excessively to the up or down side. It is possible to make wrong decisions when the markets are moving up radically or down vividly. In this case there traders will be liable to overturn the opposing views of things.
If you can control your natural emotions then you will have a tendency keep a clearer point of view on the markets. When you buy a stock you must make up you mind that these stocks are buying will rate high and you should sit back and wait. By the same token, when there is a great deal of panic selling in the market, you need to train yourself to think, “Wow, look at all these prices falling - I might find good deals here soon”. It’s more difficult than you think to be “happy” when the markets are falling and “cautious” when the markets are rising. Though, normally taking this view of things will help improve your trading over the long haul. The old saying, “Buy when there is blood in the streets" stems from this basic idea of going against the masses on Wall Street.

People tend to have a desire to buy at the bottom and sell at the top. Not just near the top, but the “exact” top. It’s only human nature to want to be the best at something, and trading is no different. Most people that take up day trading want to be the greatest they can be. Though, aiming for exact tops and bottoms when buying stocks can be very detrimental to your overall trading.

I would much somewhat give away 10pct at the top and 10pct at the bottom. You will drive yourself crazy if you punish yourself for not selling at the high or buying at the low, as it’s almost impossible for most people to do on any sort of consistent basis. Far more often than not, you’ll simply end up missing the trade. Still missing a top or bottom by 20pct is nothing to worry about.

As many a successful trader has said, “You can worry about the tops and bottoms, and I’ll worry about the remaining 60pct.” Actually, it’s often much safer to wait until a stock clearly signals a move either up or down before taking up your position.

Some people use stop orders quite often; some people only just use them at all. In my view, stops are best used to protect a nice profit and/or limit down side risk in a trade that isn’t acting as you think it should.

Often times using stops also helps to remove some of the emotions from trading. It’s far easier to place a stop on a trade than watch it trade tick-by-tick and try to decide the exact moment to get out.

What about taking profits at big gains? At some point, just like experiencing a large loss, you are likely to hit a really big winner. When this happens, consider taking 1/2 your gains off the table right away to reduce risk to the profit you have just made. This allows you to continue to profit, but protects a large amount of the money you have just made. Moreover, you might wish to consider selling enough of the position to recoup your original investment. This results in the remaining shares effectively being "free" and allows you to hold them indefinitely without any fear of a "loss" to your original capital.

When shorting stocks, there are several points to always keep in mind. Never short a stock simply based on the stock price. To really be successful as a short player (i.e. someone that shorts stocks), you need to locate stocks that are extended with a significant void of fundamental reasons. There must be some reason for the stock to decline in the near term. Simply shorting a stock “for the reason that it has a high share price” is just inviting danger.

As well, keep in mind that shorting stocks exposes you to additional risks that are not present when buying or going “long” a stock. These include having the stock called away from you, as well as being caught in a short squeeze. Also keep in mind that the very act of shorting a stock increases the unexpressed demand for the stock - namely the number of people that will ultimately have to repurchase the security down the road to cover.

Lastly, a good rule of thumb is to never short a stock which may end up on the front page of the Wall Street Journal or some other major financial publication. Typically, the best short candidates are stocks that have moved up rapidly on little or not fundamental changes and which are generally not well know to the investment public at large. While it’s true you can make money shorting well known, large cap stocks, it tends to expose you to additional risks not associated with smaller and less well known companies.