Stock Trading Tips
Forbes Special Situation Survey
Newsletter
The Prudent
Speculator Newsletter
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rarely. It's been around 50 years. The successful people already have
it.
 Successful stock market traders who know will tell you that one of the first things you need to do,
after you learn the technical side of buying and selling stocks is to develop a stock market trading strategy
and stick with it.
A trading strategy is a plan for reaching a goal, like owning your own private jet by next
year. Some folks set more modest goals.
So, how do you go about inventing a stock investing strategy? Do you seek out brokers and ask
them for their secret strategy? Do you come up with one all on your own? In that case how do you decide when to buy
and when to sell? Is your goal to make a consistent percentage of return? How many securities do you feel
comfortable owning at one time? How much of your portfolio do you keep as a cash reserve and how much do you
spend on your new jet? Answers to these questions are very important, even before you cast your first stock
purchase.
One successful trader developed an interesting trading philosophy. In brief, it implores the
new investor to trust to common sense. If it feels wrong, don't do it. Don't bet the butter and egg money on tips
from just anyone that you feel is smarter than you in stock trading. More important, he says, is to do your
diligent research yourself before spending your hard earned money. More, he has a few deeply philosophical points
to ponder for beginning traders...
- Strive to not lose money. Sounds simple in theory. Another experience trader
disagrees. He says to get guts when walking the stock market trading ways. Which sounds more like you? How to
have guts...but not lose money. Nothing ventured, nothing lost, as they say.
- Pick a safety margin and stick with it. So, if you decide to specialize in pork bellies, how much is it
worth to you to have a drawer full of stock? Say if you have a fistful of pork belly stocks valued at $10 and
you are trying to corner the market, at what price are you comfy purchasing more? If you wait until the price
drops to $5, then your margin of safety is 50%. A largish safety margin is a hedge against stock buying boo
boos.
- Invest in stocks with an eye to the long term. Long term may be a few hours for day traders, but otherwise,
we're talking days. Jumping in and out of a product quickly can get expensive, when you factor in stock broker
fees. Patience usually pays in the stock game. Not always...but usually.
- Fine tuning, you must also know when to sell and when to hold firm. Obviously there are times when long
term may not be the best strategy. Better, already have a plan in mind before you make your stock purchases.
Know what your comfort level is, and have a preset idea in your mind of when the right time to sell happens.
This will negate a lot of teeth gnashing and make for you being a happier trader for sure.
Be not greedy, you! The path of greed is littered with the carcasses of defunct stock traders.
The slow sure hand wins the race every time, for in the curvy, up and down world of stock trading, snap decisions
can lead to a lifetime of regret, or at least a good funny story to tell to cheer up a grieving friend. Panic not.
Hold the course. Trust to your research. Trust to your plan.
Keep your cash close. The fact is that there are times and situations when it just doesn't feel
right. At those times, keep your cash in hand. You do not have to trade stocks. It will keep for a day or
two until things change, and in the crazy world of stocks, things always change. The man with cool
head is the one who wins more than he loses.
Of course, there are two ways you can do your part to do your utmost to insure stock happiness
and that is to invest in
The Prudent Speculator, a Forbes Publication, and the Forbes
Special Situation Survey. As investments go, this is pretty much a no brainer. Buy at a low
cost, and reap HIGH rewards!
Further reading in this series:
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