The ASX Share market can be a great place to increase your wealth – provided you make the right moves from the start. By this I mean that there are a few fatal mistakes that can cost people their nest eggs, and see them leaving the market for good.

If you had invested $150 a month in the ASX share market starting in 1980, and earning an average of 15% per annum, today you would have $1,038,490 or over one million dollars. $38 a week. Not bad, eh?

But many people when first starting out make a few fatal mistakes – maybe they lose a little (or a lot) of money. And they stop investing. They get scared out of the market. And because of this they lose out on all the rest of the gains over the years – they lose out on that million dollars we just discovered.

So how can we make sure we don\’t make the same mistake trading ASX shares? Your Trading Plan is the answer, and although it can be simple, it is the most powerful tool you will use in the market. If you haven\’t got one, you shouldn\’t be trading. But where do we start?

Well, one man\’s trading plan is another man\’s ruin. In other words, we are all different – and we all invest differently. But there are a few solid ground rules that will make your job easier. So having a trading plan should definitely involve the following:

1: Your Rules for Entry and Exit – or in other words, your rules for when you buy a share and when you sell a share. There are many different ways: some people use fundamental reasons like a company\’s earnings before interest and tax (EBIT), and others use technical reasons, like a breakout from price consolidation or the crossing of a trend line.

2: Your Money Management Rules – this is where you decide how much of your portfolio you will invest in one share. And also how many positions you will spread your portfolio across. As a guide, between 6 and 12 positions is usually optimum. Any less than 6 and you risk not being diversified enough. Any more than 12 and you risk being unable to out-perform the market (the best portfolios are often slightly focused).

While some people can spend years determining the right trading plan – it doesn\’t need to be complicated. With these rules you are well on your way to success in ASX shares.

Get more from your ASX Shares with a free course on trading and investing. There\’s also free research on Australian Stocks – all at www.asxmarketwatch.com .