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10 Tips For Successful Stock Market Trading
1. Bargain shop � When stock prices drop it is time to hunt around for some bargains. Remember that you want to buy low and sell high. When the stocks are low it is the prefect time to buy. Don�t fall into the trap of selling off your stock the minute it starts to lose money. Let cooler heads prevail and wait out the market. Over time, the stocks will make money, but you have to be in it for the long haul.
2. If everyone else is already talking about a stock, you should avoid it. If a stock is hot enough to be fodder at a cocktail party then chances are the stock has already reached its saturation, and you should not get involved.
3. Cut your losses � sometimes stocks do not perform as expected. Rather than hang on in hopes of it re-bounding, get out now. You�ll be able to cut your losses at a reasonable point. If you hold on and the stock plummets even more you will lose a whole lot more.
4. If your stock keeps setting record highs, don�t sell. There is something good happening at that company so it would make sense to hold onto the stock because it will likely rise again.
5. Diversify your portfolio � This is very important. If you have a portfolio with nothing except tech stocks, and then that industry takes a downturn, you will be in financial ruins. On the other hand, you don�t want an entire portfolio of bonds either. The key is to spread your investment risk over several industries and types of stock.
6. Know what you are buying � If you don�t understand the stock or commodity, don�t get involved. It doesn�t matter who tell you that it is the hottest IPO in months, if you do not have a grasp of the industry then it is best to avoid the investment.
7. Choose stocks with your head, not with your heart � Unfortunately many people let their emotions dictate which stocks they buy and sell. You will not be successful trading stocks if you let your emotions get into the way. It is simply a recipe for disaster.
8. Dollar cost averaging � this investment strategy minimizes risk when purchasing large single stock purchase. You invest a set amount every week or once a month and buy the same stock regardless of the price. Spreading the investment over a longer period of time will help prevent the market losing value after purchase.
9. Only invest what you can afford to lose � Essentially, stock investing is a gamble. Some stocks go up and some go down. Many will go down after you bought them high. Just understand that going into investing in the stock market that you might lose some money.
10. Invest in businesses, not stocks � Okay, so you really are buying stock in a business, but the idea is the same. Don�t look at how well the stock is doing. Investigate how well the business is doing. Who is the competitor of this business? What is the potential for new product development? These indicators are very important to how well a company�s stock will do.
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