How to invest in stocks
and do not lose money
How to invest in shares
and minimize your risks
People often ask how to invest in stocks especially when they see as stock they bought as investment drop in price. It is common issue that only few investors try to learn invest in stock before they do any investment decision.There are a lot of investors that were super gurus during bull market in 1980s and 1990s that understand how to pick best stock to invest in. It was easy to pick any stock, wait for small decrease in price and buy it. It was almost sure that price will rise again to new highs. This bull market lasted so long that a lot of investors do not learn anything else then that prices has been rising only. It was easy time for "buy-and-hold" investors. But situation has changed at the beginning of year 2000. First significant bear market drop in year 2000 wiped out money of a lot of investors.
Many investors already finished with so small amount of money that they resigned to start investing again. And many of them also blamed everybody else but them for this result.The truth is that they received what they were prepared for.
How to invest in shares
with smallest risk ?
Everybody must understand that there is risk associated with stock investing. We are not now in long lasting bull market and situation is much more volatile. Stock market experiences strong uptrends followed by volatile moves down in
bear market mood.
It is not time to be buy and hold investor.It is all based on economy. It is not possible to have only rising economy. Every economy has ups and downs, expansions and recessions. Central bankers and government are trying to avoid recession to see only growth but their fight is not going to be successful. The longer they will block decline in economic activity, the stronger decline will be. We have been able to see first sign in period from 2003 to 2008 when easy monetary policy of US central bank stimulated very good growth only to be replaced by very strong decline in economic activity. But it looks like central banker have not any memory as they are trying to stimulate economy again and do not allow cleansing process to wipe things that are not working and that allows new healthy economic expansion again. This situation is very risky for buy-and-hold passive investors. It is time to be much more active investor or start to be more active trader to achieve expected results. And everyone must understand that only he or she is responsible for his/her results. This is first answer to question
how to invest in stocks.
Good business plan
helps how to invest in stocks
Second important point is to prepare
good business plan
describing basics of how to invest in stocks. This plan helps to define framework for more detailed description of stock trading system and stock trading strategy that will be used.
Minimize risk and protect your money
even with best stock to invest in
Very important role in all activities related to stock market is to minimize your risk. The truth is that not all trades will finish with profit. There are also loss accompanied to some trades. But it is normal, it is not mistake. The key is to manage your losses small and keep your winning trades to generate big profits.The key role in this process play
stop loss techniques.
Every single trade, every single investment must be accompanied with stop loss. Even it is best stock to invest in. Every time
money management rules
must be used for every single stock pick. Remember that it is not mistake to finish your trade or investment on stop loss and realize loss. The problems often happens when first possible loss(that was small) was not realized. Then it is almost sure that price will dive much more to the point when loss created on the trade is huge. And this is
situation that must be avoided.
Best traders and investors in the world know it and do everything against it. Keep in mind. It is not necessary to have all trades or investment decisions in profit. The
50% of them is enough
to make nice gains for a year. So honor your stop loss levels.
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