Here are some trading strategies that have helped me over the years. To really put your money to work you will need investments. The most simple is investing in the stock market. Leave your strategies in the comments below for others to learn!
1. Only invest what you are willing and to lose!
If you only follow one rule, let it be this one. I hold solid to this one.
I have talked to people that have taken out lines of credit on their homes only to lose it in the market. Why do this? It does not matter if it is $3,000 or $100,000, only invest what you are willing and can afford to lose. If you follow this rule, any amount you lose will not send you to the mental institution.
2. Don’t invest with emotions.
Emotions will always lose you money or minimize return. Some of my friends manage their stock investments this, the result is normally always the same. They buy high, sell low. Not a winning strategy. For the average investors time and consistency work better than any other strategy.
3. No need to pick a stock picking expert, use index funds or low cost mutual funds
Mutual funds and index funds are a great way to have someone else manage your risk. I personally use sites like Schwab.com and Morningstar.com to help invest and find options. A simple fund like SPY will make good returns over the long run. Don’t overthink this, stay simple and succeed.
4. Do not use margin.
I know it is tempting, especially when you have some winners in your portfolio. Unless you are very well seasoned with investing and know how to effectively use margin, stay away. Improperly using margin can quickly take you portfolio to zero.
5. Don’t count on the big win!
You are not going to hit it and if you do then you probably lost somewhere else. When you begin investing you should look for solid performing stocks and mutual funds. This is not going to double your money overnight, but it will keep your risk down and if done correctly start to grow your portfolio. Only after you have built some equity should you begin to try picking some stocks you believe in. When you get to this stage, only use a very small portion of your portfolio, I say less than 5%. If you do hit it big you will still make some money, if you lose it is not all of your portfolio.
6. Eliminate should of, could of, only if, bought to soon, and sold to late from your vocabulary.
You can not dwell on your past actions. It is important to learn why something happened so that you can do better or duplicate it, but if you are looking at that next purchase and you are on the fence but and are thinking “the last stock I should of bought sooner” run away and start fresh. This is emotion based investing.
7. Don’t chase waves ride them!
By the time you see the wave it is probably too late and you will likely get crushed to the bottom. Consistency in your investment strategies will help you ride the waves.
8. Set goals!
If you buy stocks and want to eliminate emotions from your stock trading, you have to set goals and strategies for each trade. If you stick to your strategy you have more control. Yeah, sometimes you might lose out on some big gain, but it goes both ways. If a stock far surpasses your goal because of some news and you think there is more room, then you can always sell a portion of you position and hedge your risk, but other than that when you goal is reached you should take your action.
9. It is not profit until you sell.
So many times I here people talking about huge gains and how well they are doing in the market only to find out several months later they have huge losses. Mainly because they were lucky enough to be on the ground when a wave started and elected to hold their position instead of selling at the peak. This is why it is important to have realistic goals and sell your positions when they are reached. If you are not a buy/sell person then stick to mutual funds and let the managers do the work.
10. Dollar cost average.
Trying to time your entry and selling points is almost impossible. Set consistent entries (monthly, weekly, or daily). Over time you will average out the high and low points and give you an overall better average cost of your investments.
Please share your successful strategies in the comments below!