On what seemed to be a fairly normal trading day on New York Stock Exchange in 2007, things suddenly started to get crazy. Multiple buy and sell orders started to flood in almost simultaneously, immediately followed by cancellations. In a matter of minutes, these orders had run into six figures.

These orders caused a major bottleneck for other traders and investors who were unable to get their own orders executed within acceptable timeframes.

The whole thing came to light just last month when the NYSE fined Credit Suisse for allowing a rogue algorithm to go haywire and send all these messages, unfiltered, into the market.

But what was actually behind Credit Suisse’s activities?

Like many Wall Street firms such as Goldman Sachs, JP Morgan and BNY, Credit Suisse has a proprietary trading desk that runs a number of algorithmic trading and high frequency trading strategies. Using complex computer programs, high frequency trading systems generate multiple electronic orders and send them into the market to try to capture best prices and liquidity ahead of other market participants. Over the last few years this practice has grown to such an extent that it now accounts for up to 80% of all volume on US Equity markets, according to some industry analysts.

The problem with these algorithms however is when they go wrong. Fortunately, the NYSE survived the Credit Suisse episode, which was actually a fairly small-scale error. But if it had been multiplied, it could have brought trading on the exchange to a complete halt. Hence the fine.

Ever since the advent of electronic markets, there have always been errors just waiting to happen. Many of these are down to “fat finger” mistakes, where a trader might buy the wrong stock or the wrong amount of stock. But high frequency trading takes the potential damage from such errors to a whole new scale.

This is one of the reasons why regulators are now starting to tighten up on the whole high frequency trading and algorithmic trading world.

We all know that there is a lot of risk that we will encounter in the stock market. But it will help us if we set a guideline to follow in making our decisions in our trading strategies.  There are experts that probably have their own ideas of the rules that are the most important things to follow in the trading industry, but here are some top 10 trading rules that will usually come up.

1. You need to have a strategy and stick to it – Before you start trading, do some critical research on the different trading strategies and choose which one is the best one that will fit your financial goals and personal style. Then you must stick with that strategy.

2. Follow the trend – You don’t need to try to buck the trend. For some traders this is easier said than done. Some of the people that get involved in stock market are often more independently minded than the average and they have a natural tendency to avoid doing than what everyone else is doing, but for the sake of your profits, try to rein that tendency in.  That way you will be able to make money with your investments.

3. You must know when to cut your losses – This is another rule that you will often hear.  We don’t like to admit that we’ve made a mistake.  An investor simply hopes that the stock will turn around.  They simply keep waiting for the stock to turn around and waste the opportunities that could come from elsewhere.. Before you enter a certain trade, you need decide your stop loss price so that you’ll know exactly when to sell it.

4. Do not overtrade – You need to try and stick from 3 to 5 positions that you know well.  Be satisfied with those positions   Go higher than that and you’re likely to start losing control and will probably make unsound decisions.

5. You should manage your risk – Before you can even start trading for the day, you should choose what your objectives, entry points, are and the exit points to avoid any rash decisions that may come. You should never risk more than 5% of your account in one trade alone.

6. You should do your research – Before you decide to buy a stock in a company, you need to learn as much as you can about that company and where it’s headed. You need to look up more than its stock symbol. Dig up more information on how the company is being run, their objectives, and what their customers think about them.

7. You should be flexible – Sticking to your strategy is important, the stock market industry is a highly dynamic place and it’s bound to surprise you every time when there is a sudden shift from time to time. You should accept this and always be ready to change your decisions when it is needed.

8. Beware of your emotions – Surely when you’re tired, grumpy, or even overly optimistic, then you should take the day off.  This also applies if you’re not feeling well. Mistakes can be caused by your emotions or plain tiredness will cost you money, which will not do anything for your mood or your health.

9. Question everything – We know that everyone makes mistakes and no trading system is perfect, since we are just human beings.  That’s fine and, in fact, your profitability scenario will take cues from the experts, but you need to verify any information and tips before you decide to invest.

10. Be Alert – This is common, but being alert will allow you to react fast as the sudden changes occur while you are trading. This will allow you to find solutions fast and to lessen the damage that any sudden change may do.

Stock Market Tips—Mistakes You Need to Avoid

If you have been looking for stock market tips on the internet, you are undoubtedly finding a lot of information on what to do. However, you may end up learning more if you find out what NOT to do! One way to succeed in investing is to learn from other people’s mistakes. With that said, here are a few ideas of what NOT to do as a beginning investor:

• Refusing to accept a loss. No matter how great you are, and no matter how wonderful an investment seems, an occasional loss is imminent. Even the most knowledgeable traders make mistakes. It is important to accept small losses, so that you do not get yourself into too much debt.

• Not educating yourself. You must do your homework, no matter how knowledgeable you already are. The stock market is an ever-changing industry, and stocks go up and down every single day. Thus, you need to keep up with all the latest news, particularly where your own stocks are concerned if you want to keep up with the market while engaged in stock market trading.

• Panicking and selling too quickly. On one hand, you need to know when to accept losses. On the other, you cannot panic over losses, either. Do not sell out of fear—only sell when it makes the most logical sense to do so. Never be too quick to jump the gun.

• Getting too excited over a stock. While it is always great to feel positive about a stock, never feel overly excited about one. Even if you are having the best day of your life, you should still think logically when it comes to stocks. Some people refer to this as “emotional trading”. Just like you should not panic and sell when feeling frightened, you should never get too excited and trade when you are excited or happy.

Remember these four mistakes that many traders make. There are plenty of stock market tips online that will help you get started, yet you should always keep these four in mind to keep your losses at a minimum.