The vital component is the trading plan. This does not need to be overly complex. You just need to know what you will do if the share price goes up, down or sideways. If you can cover these three things then you have a contingency for anything the share price can throw at you. And more importantly you will prevent yourself from reacting to sudden market fluctuations that happen all of the time.

The trading plan should also incorporate an overall strategy for the share that you have selected and explain the reasoning behind why you are doing what you are doing ie why you decided to place your order level at this particular point.

You will need a robust risk management strategy and to be successful in the long term you will need to implement the strategy. The number of times Ive seen people unwilling to action there risk management plan when the share price reaches their pre-determined value price is a little bit scary.

The above three things are great to have in place but do not forget that you must be disciplined in implementing them otherwise you are setting yourself up for failure. And you should remember that to get good at anything you need to practice and you need to gain experience. Champions are made in training. Not on the track.

After identifying these strategic factors you should consider how much you are willing to outlay on each share. It is important to try and spend the same amount on each share ie $5000 across a portfolio of 10 shares in different industries in order to maintain a balanced portfolio.

Finally before deciding to go ahead with any investment you should asses whether its risk to return is worth it. There is no point risking $1 to try to make 50 cents. Over my investing lifespan I have stuck with a ratio of 1:3. For every dollar that I am risking I stand to make at least three or if I stand to make $3000 from a trade then I am willing to risk $1000 in order to make it. The reasoning behind this ratio is that no matter how good you are you will always loose in some of your investments. Having a ratio like this ensures that when the of the investments pay off they more than compensate for any that lose.

To recap any successful investor must exhibit these characteristics over the long term.

Make investment or trading plans and stick to them They make trading plans based on reliable information in the clear calm light of day and not emotional reactions that may emanate from the panic or euphoria of the share market. And, they stick to their plan

Assess the Risk/Return Ratio of each trade. They only enter into investments that offer reasonable potential for profit

Manage the risk of every investment. And never lose too much

Only put their money into financially secure companies

Buy shares when they are cheap and sell those that are expensive relative to their price trends

Only trade in companies whose prices are in trending up

Author's Bio: 

Articles on stock market trading, finance, investing tips and many more stock trading related. Check the stock market strategy on http://www.2stocktrading.com.