I'm convinced there is no correlation between IQ and trading ability. Many professionals, doctors, lawyers, and accountants think that because they are successful in their profession they don't need investment advice from a site like this. They just assume they will be equally successful at trading. I know because I can count myself amongst them!
So here are the first two entries in the list of '10 Things I Wish I'd Known Before I Started Investing.'
1. The stop loss is your friend
When you enter a trade, you should always decide on a price at which you will accept that the trade hasn’t worked, and act immediately to cut your losses. This is your stop loss. Acting on your stop is much, much harder than it sounds. You can always come up with good reasons why the trade should be given ‘a little more breathing room’. There may indeed be occasions where a stock recovers and climbs back into profit, but even more times where the stock continues to fall, causing you unnecessary losses. Make it a hard and fast rule to always respect your stops. In my opinion, when you can take a loss without undue emotion, realizing that it is just part of trading, you are on your way to becoming a successful investor.
2. Size does matter
If you are a beginning investor, looking to learn the ropes and build an investment nest-egg, penny stocks are probably not the best place to start! Many of these stocks can be very volatile. That means they could double overnight, but they could also halve, and halving a small account can be a game-stopper for you. Stick to the mid-cap and large-cap stocks until you gain more experience.
More to follow....
So here are the first two entries in the list of '10 Things I Wish I'd Known Before I Started Investing.'
1. The stop loss is your friend
When you enter a trade, you should always decide on a price at which you will accept that the trade hasn’t worked, and act immediately to cut your losses. This is your stop loss. Acting on your stop is much, much harder than it sounds. You can always come up with good reasons why the trade should be given ‘a little more breathing room’. There may indeed be occasions where a stock recovers and climbs back into profit, but even more times where the stock continues to fall, causing you unnecessary losses. Make it a hard and fast rule to always respect your stops. In my opinion, when you can take a loss without undue emotion, realizing that it is just part of trading, you are on your way to becoming a successful investor.
2. Size does matter
If you are a beginning investor, looking to learn the ropes and build an investment nest-egg, penny stocks are probably not the best place to start! Many of these stocks can be very volatile. That means they could double overnight, but they could also halve, and halving a small account can be a game-stopper for you. Stick to the mid-cap and large-cap stocks until you gain more experience.
More to follow....
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