How to Win the Stock Market Game; 9 Rules for Investing Successfully in the Markets
Sol Palha - Utilizing key elements of Technical analysis with the most compelling elements of mass psychology to spot novel opportunities in the markets
A little knowledge that acts is worth infinitely more than much
knowledge that is idle. Kahlil Gibran
When it comes to investing, the first thing you need to learn is
efficient management of your emotions. It is impossible to eliminate the
impulse to act when euphoria or panic are in the air. While you cannot delete
the feeling that pushes to you react, you can control your reaction. You can
choose to run with the herd of fight panic and stand aside while the herd
stampedes. The most important rule is never to let your emotions do the
talking; fear and euphoria should be meaningless words when it comes to
trading. If you fail to control your emotions, then nothing can help you. All
the rules in the world will fail to alter your outcome.
1. Management of your emotions: Panic and euphoria are useless
when it comes to trading. Control them or be controlled by them.
2. Patience and discipline: these are two of the most important
traits that you need to master, after the above rule. You cannot win in the
markets if you are in a rush and lack discipline. You need to wait for the
crowd to panic, before deploying large chunks of our money into stocks. If you
decide to short the markets, do not oppose the masses just because they have
jumped on the bandwagon. One must wait until the bandwagon is overloaded and
threatens to buckle under its weight before you head for the exits and plan on
taking a position that opposes that of the masses.
3. Popular media should be avoided; if you are seeking
investment advice from these places, your investment results will be dismal at
best. Use traditional media to get a gauge on what the masses are doing.
4. Have a strategy in place without one success is going to be
elusive. Don’t attempt to score a home run; your only reward will be loss and
misery. The plan should include profit targets on each and every trade, and, an
exit plan, in case the trade does not work out.
5. Understand what you are getting into; this means taking the
time to find out the nuances of the market you are going to deploy your hard
earned cash into. We have put up an extensive list of resources. Free Trading
Resources
6. Technical analysis; this tool can further help refine your
entry points. It would be a good thing to understand how to use 2-3 indicators;
you can use this knowledge to get into the market when the indicators are
trading in the extremely oversold or overbought ranges. You can still succeed
without using it but putting it to use can help you lock in even larger
profits.
7. The law of balancing; when you win a significant amount of
money, help one person in your lifetime and your rewards will be 100 fold.
8. Options should be avoided at all costs at least in the
beginning of your investment journey. Make some money in the market first and
then you can use some of the profits to speculate with.
9. Learn to relax. A stressed mind is no good to you. A diseased
body is a body not at ease, so if you are not at ease, you will perform
miserably in the markets.
Putting it altogether
A true contrarian never opens a position unless blood is freely
flowing on the streets or the investment in question is despised or being
ignored by the masses. Buy when the crowd is paralysed with terror and panic
and sell when the masses are jubilantly buying. When you are feeling ecstatic,
flee for the exits.
Don’t be too confident as this is usually arrogance disguising
itself as confidence. The stock market takes no prisoners Stops are an
important part of trading; they help you minimise your losses. Never open a
position without determining upfront how much you are prepared to lose.
Investing is all about emotions and overcoming them. Do not
align yourself with the crowd for they are notorious for being on the wrong
side of the equation.
‘’How do you know so much about everything?’’ was asked of a
very wise and intelligent man; and the answer was ‘’By never being afraid or
ashamed to ask questions as to anything of which I was ignorant.
John Abbott
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