|
Greattips www.GreatTipsIndia.com
|
|
Will it Work ? Are You Sure ? Why not confirm it….. |
|
By continuing to read or referring to material contained in any of our services, you have read and agreed to the disclosure & disclaimers mentioned & published at our site: www.GreatTipsIndia.com |
12 Basic Stock Investing Rules Every Successful
Investor Should Follow
There are many important things you need to know to trade
and invest successfully
in the stock market or
any other market. 12 of the most important things that I can share with you
based on many years of trading experience are enumerated below.
1. Buy low-sell
high. As simple as this concept appears to be, the vast majority
of investors do the exact opposite. Your ability to consistently buy low and
sell high, will determine the success, or failure, of your investments. Your
rate of return is determined 100% by when you enter the stock market.
2. The stock market
is always right and price is the only reality in trading. If
you want to make money in any market, you need to mirror what the market is
doing. If the market is going down and you are long, the market is right and
you are wrong. If the stock market is going up and you are short, the market is
right and you are wrong.
Other things being equal, the longer you stay right with the
stock market, the more money you will make. The longer you stay wrong with the
stock market, the more money you will lose.
3. Every market or
stock that goes up will go down and most markets or stocks that have gone down, will go up. The more
extreme the move up or down, the more extreme the movement in the opposite
direction once the trend changes. This is also known as "the trend
always changes rule."
4. If you are looking for "reasons" that stocks or markets make large
directional moves, you will probably never know for certain. Since we are
dealing with perception of markets-not necessarily reality, you are wasting
your time looking for the many reasons markets move.
A huge mistake most investors make is assuming that stock
markets are rational or that they are capable of ascertaining why markets do
anything. To make a profit trading, it is only necessary to know that markets
are moving - not why they are moving. Stock market winners only care about
direction and duration, while market losers are obsessed with the whys.
5. Stock markets
generally move in advance of news or supportive fundamentals -
sometimes months in advance. If you wait to invest until it is totally clear to
you why a stock or a market is moving, you have to assume that others have done
the same thing and you may be too late.
You need to get positioned before the largest directional
trend move takes place. The market reaction to good or bad news in a bull
market will be positive more often than not. The market reaction to good or bad
news in a bear market will be negative more often than not.
6. The trend is
your friend. Since the trend is the basis of all profit, we need long term
trends to make sizeable money. The key is to know when to get aboard a trend
and stick with it for a long period of time to maximize profits. Contrary to
the short term perspective of most investors today, all the big money is made
by catching large market moves - not by day trading or short term stock
investing.
7. You must let your
profits run and cut your losses quickly if you are to have any
chance of being successful. Trading discipline is not a sufficient condition to
make money in the markets, but it is a necessary condition. If you do not
practice highly disciplined trading, you will not make money over the long
term. This is a stock trading “system” in itself.
8. The Efficient
Market Hypothesis is fallacious and is actually a derivative of the perfect
competition model of capitalism. The Efficient Market Hypothesis at root shares
many of the same false premises as the perfect competition paradigm as
described by a well known economist.
The perfect competition model is not based on anything that
exists on this earth. Consistently profitable professional traders simply have
better information - and they act on it. Most non-professionals trade strictly
on emotion, and lose much more money than they earn.
The combination of superior information for some investors
and the usual panic as losses mount caused by buying high and selling low for
others, creates inefficient markets.
9. Traditional technical and fundamental analysis alone may
not enable you to consistently make money in the markets. Successful market timing is possible
but not with the tools of analysis that most people employ.
If you eliminate optimization, data mining, subjectivism,
and other such statistical tricks and data manipulation, most trading ideas are
losers.
10. Never trust the
advice and/or ideas of trading software vendors, stock trading
system sellers, market commentators, financial analysts, brokers, newsletter
publishers, trading authors, etc., unless they trade their own money and have
traded successfully for years.
Note those that have traded successfully over very long
periods of time are very few in number. Keep in mind that Wall Street and other
financial firms make money by selling you something - not instilling wisdom in
you. You should make your own trading decisions based on a rational analysis of
all the facts.
11. The worst thing
an investor can do is take a large loss on their position or
portfolio. Market timing can help avert this much too common experience.
You can avoid making that huge mistake by avoiding buying
things when they are high. It should be obvious that you should only buy when
stocks are low and only sell when stocks are high.
Since your starting point is critical in determining your
total return, if you buy low, your long term investment results are irrefutably
better than someone that bought high.
12. The most successful investing methods should
take most individuals no more than four
or five hours per week and, for the majority of us, only one or
two hours per week with little to no stress involved.
|
Happy Investing & Trading… |