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.
C.C. Collins is a Financial Planning Advisor and Author of "Scientific Wealth Strategies" at http://www.wealthscientist.com Find more information at http://www.wealthscientist.com
Airbnb cleaning service Arlington Heights ..What is leverage?Here is a definition of leverage from an... Read More
In a previously written article, we expanded the use of... Read More
Intervention. Now don't let that big word scare you. The... Read More
The stock market has not been very kind to your... Read More
There are red lights, green lights, blue lights and spot... Read More
One of the basic laws of physics states that a... Read More
This is a guide to the different types of mutual... Read More
The bear market that showed up at the end of... Read More
The higher the market goes the more confusing are the... Read More
Look back over the years and try to remember how... Read More
The date October 13, 2000 will forever be embedded in... Read More
I have watched my cat play with a bag of... Read More
Every day I hear someone on CNBC proclaim that "this... Read More
There are many important things you need to know to... Read More
Index Fund Trading can be one of the most profitable...or... Read More
I cringe every time I hear a novice investor tell... Read More
Every day I see in the financial section of newspapers... Read More
We need a rabbit!This was a pretty horrible week for... Read More
One of the great "secrets" of successful people is discipline... Read More
The bulls and bears of the stock market are both... Read More
When it comes to mutual funds, there is a lot... Read More
Refuse is a serious issue in any society, about as... Read More
How many people went to a cash position this week?... Read More
Is really not as important as to how you invest... Read More
You'd have had to be living on a desert island... Read More
reliable maid service Winnetka ..You'd have had to be living on a desert island... Read More
When an individual investor wants to roll up his sleeves... Read More
The stock market can present you with a lot of... Read More
If you have been dealing with mutual funds for any... Read More
One of the great truisms of Wall Street is "Don't... Read More
Reach in your pocket and take out that big roll... Read More
There is a famous cliff on the ocean in Acapulco... Read More
Hello Inflation, it has been awhile, I see you on... Read More
If you were to find that you had some severe... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
Economists know more about how the fragments of society work... Read More
The fight continues to rage among traders who use technical... Read More
People are always asking me when should I sell my... Read More
Index Fund Trading can be one of the most profitable...or... Read More
Regardless of the fact that the world's stock markets have... Read More
Every day on CNBC-TV they show a 200-day moving average... Read More
Let's hope you did not have any of the Enron... Read More
I am sure that if you have a brokerage account... Read More
During our travel down life's path we come to many... Read More
How is it possible that trash Companies are posting less... Read More
Sometime around 1980, can't remember exactly, there was a flight... Read More
Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More
For some "long term" would mean holding a stock position... Read More
What does it mean to short a stock?This means that... Read More
Several times each month I am solicited by various market... Read More
Stocks & Mutual Fund |