Imagine there is a bank, which credits your account each morning. What would you do?
Imagine there is a bank, which credits your account each morning with some cash, carries over no balance from day to day; allows you to keep no cash balance, and every evening cancels whatever part of the amount you had failed to use during the day. What would you do? Draw out every cent, of course!
Well, everyone has such a bank. Its name is stock market. Every morning, it credits you with plenty of opportunities. Every evening it writes off, as lost, whatever of this you have failed to invest. Each day it opens a new account for you. Each evening it burns the records of the day. If you fail to use the day’s opportunities, the loss is yours. There is no going back. Invest in it to get from it the utmost.
I think almost anyone can be profitable in the stock market given enough time and effort, but to be a great trader, you have to have a passion for it. You have to love trading.
If you are a beginner, trade with an amount of money that is small enough so that you can afford to lose it. It is much better to learn the lesson that you can lose everything when you do not have that much money than to learn the same lesson later on
You should take responsibility of your decision as well as doing the necessary research to evaluate the stock. We have a tendency to listen to others, especially when we are clueless. Do not believe in stock recommendations. When things turn out worse, we would blame it on others – the person recommended. The person who told you to buy stocks is not going to pay for your mistake.
At times, due to the varying practices and philosophies from traders, you may be confused with the clash of ideas. There are traders who just use fundamentals, some technical, some do both, some use scientific research, some use gut, etc. It would be helpful to know what style suits you best, in terms of your inclination, perspective and knowledge.
In the stock market what you practice is what you perform. If you really want to excel in any field, you have to practice. You don’t just read about something and expect to be good; you have to do it too.
You can lose money even if you select the right stocks. It’s alright to lose. You must have the courage to carry out trading even after a string of losses.
You are often put into an ‘emotion turmoil’ kind of situation, torn between greed and fear. Greed will tell you to go for it and you will feel very bad if you miss the boat, while fear will tell me not to as you will suffer another loss. To resolve the battle, this is where the conviction comes in. The conviction that your trading system is proven to be profitable. As long as you trade correctly, you will end up in profits.
Be selective, choose the right time and choose the right stocks. Traders should have price memories and they form key resistance and support. Erratic price movement or excess volatility is bad for trading. Only buy/sell according to the longer time frame. Rising prices must be accompanied by rising volume, if not the price will collapse due to insufficient buyers in the market to hold or push the price higher. Volume is the bloodline for price movement. George Soros said it does not matter whether you are right or wrong, the important thing is how much you lose when you are wrong and how much you win when you are right. Building on these, you will continue to refine your trading skills and understand the market and yourself.
The earlier you understand the importance of patience and the more you can practice it, the less you lose and the more you gain. Like what Warren Buffett says, “The trick is, when there’s nothing to do, do nothing.” Opportunities do not appear all the time. A good trader will wait for the best opportunity while an amateur trader will make a trade whenever he/she perceive there is one. Patience allows you to remain rational and do opposite to what most irrational traders do.
You have to make money, in any market, under any circumstances. You enter the trade, you exit the trade, the wins and losses are yours alone. ALL that really matters is current price action not your opinion of what might be price action later. The market doesn’t care about your opinions or any other single person’s opinions. Start to change your position quickly when you are proven wrong in a trade. Letting a small loss turn into a huge loss is generally, what breaks traders and their accounts. Successful trading is about managing trades once you are in them, regardless of where they came from. Buy stocks that you will feel comfortable holding. Buying stock in a company is relatively easy once you’ve researched the stocks you’re interested in. But selling needs some thought. As we all know that any investment is not free from risk. Making profits in shares is not in your hands, but avoiding mistakes is definitely up to you. Understand that you can never know everything. Learning to live with the anxiety of the unknown is part of investing. Being enthusiastic about getting started is the first step. With enough time and a little discipline, you are all but guaranteed to make the right moves in the market.
(The writer is a retired police
officer and now a veteran investor in the stock market.
You can reach him at
samarakoneasoka@gmail.com).