Sunday, January 9, 2011

What i believe when it comes to trading

These are just my thoughts and i would like to share on the funny things about trading. It may sound senseless to you but i hope that someone do agree about it or felt the same way like i do during the course of learning and starting to trade stocks using your own hard earned money.

1. Praying doesn't help...what goes up will come down and down and down
I always fall into this trap when i was new to trading. Being ignorant, whenever a particular stock price goes in the opposite direction, there is always a mindset that i should hold and wait for the best. This stock will eventually rise and make profits. When weeks passed and months approached, i started praying. God, please make this stock rise, i will stop humiliating my brother and treat him nicer. Just when i couldn't wait anymore and seeing that my funds are depleting, i got out with huge losses when i could have lose lesser if i got out earlier. To add more salt to the wound. God answered my prayers too late and the stock shot up the ceiling while i continued to lick my wounds and cursed myself for not holding... If this sounds familiar to you, welcome to the club. You are not the only one.  My suggestion to such situation is to put a stop loss or give yourself a tolerance level, how much are you willing to lose.Set that level and sell when it is reached. Pick yourself up and carry on trading. Dont give up.

2. Ask if you are not sure!!
Throw out your ego when trading. Don't always think that you are right and worst of all, do not "Assume". Ask someone for help whenever you are not sure on how to trade, i have seen people blindly keying wrong figures and instead of buying, they short sell. Imagine the amount of losses you could make if you do not verify!! 

3. Don't impule buy because your friend says this stock is a runner
Would you go to war not wearing your protective gear or fight your enemies without carrying your weapons?! I hope your answer is no... Just like war, you need to arm yourself before buying a particular stock. Have you done a analysis or a simple study of the company? Have you taken a look at the chart? Fundamentally is it sound? Technically is it right? If you are not sure of what this company does, don't even do a impulse buy. I would rather miss this opportunity than to lose money without making preparations.

4. Crying over spilled milk (You lost money in a trade)
Get over it! So what if you make a mistake, who doesn't! Look at Bush, he's doing fine...wounds will become scars, they heal eventually.