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Trading Tips
Many
individuals succeed by repeating in their minds the steps
they need to accomplish to achieve a goal. In the same way
its good for investors to regularly review some of the steps
recognized that will make them successful. Many of these ideals
are familiar to us all, but are worth repeating. Diversify;
don't put all your funds in one. All it takes is one earnings
warning or a single product mishap and you can end up down
30 or 50 percent. Spreading your funds across at least
6 to 10 stocks is a prudent minimum. Allocate funds across
different industries and different exchanges to buffer yourself
against market gyrations. A number of times in the past year
we've seen dollars shift out of the NASDAQ and into the NYSE
for a brief period to just see them return again. Use stops;
set a percentage- or support- based loss limit when you enter
a position, and stick to it. Keep in mind that a small loss
can be recouped with an easily attained small gain, while
large losses take much larger gains to just get even. On winning
positions move a trailing stop up behind your position to
lock-in profits. There are times you can benefit from selling
stocks short, buying options, or writing covered call options,
but most brokerage accounts require that separate account
documents be in place before you can make these types of trades.
Get these forms submitted early, because the firm won't be
in a hurry to update your account when you're in a hurry to
place one of these trades. Trade based on your intellect,
not your emotions. Most short-term traders should also have
a longer-term portfolio. Some trades turn into longer-term
positions. Plan for retirement. After large gains in the market
many investors should consider shifting a portion of their
profits into other assets, real estate, or even consider paying
down a mortgage.
Learn as much as possible about the
investment markets. Subscribe to daily, weekly, and monthly
financial publications. Learn about technical and fundamental
analysis. Watch for trends. The people who bought Yahoo!,
and AOL early in the Internet craze have done very well. The
investors who bought Microsoft and Dell early in the personal
computer boom smiled all the way to the bank. Cures and
treatments are on their way for AIDS and cancer. Fuel cells
and other innovative power generation methods are getting
noticed. Cleaner burning, agriculture-based, and Middle East
independent "bio-diesel" is being developed as an
equivalent for petroleum-based diesel fuel and heating oil.
Buy and use a computer. You can trade at substantial savings
and receive e-mail about your investments. Understand what
major factors are moving the markets. Over the past year Wall
Street has been enamored with the Fed, interest rates, and
inflation. More recently the concern has been corporate earnings
and oil prices. Go back two decades and the concern was on
M1 and M2 money supply.
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