Stock Trading

Over the next few days, we will be discussing stock trading principles. Here is the first part in an ongoing series.

You can access all of these principles in one place my clicking on the Stock Trading Principles tag at the bottom this post.

Most of us are attracted to stock trading by the promise of higher returns that most commercials of brokerage houses claim.

A legitimate question that we should ask is, is it really true that you can get higher returns by trading or investing in stocks?

Well, like in anything we undertake, it is really depends on the individual stock trader or investor.

It is absolutely true that investing or trading in stocks provides us ample opportunities to eek out much higher rates of return on investment than money market funds, savings accounts, and mutual funds.

But, and this is big but, it is really up to the trader to make it happen.

The Stock market exposes the weaknesses in our characters like nothing else ever can.

As traders or investors the sooner we can come to grips with the fundamental truth about making money in the market, the better the returns will be.

And the fundamental truth is that nobody ever can predict what the market is going to do in the future. As traders, we have to learn to deal with uncertainties and probabilities.

You have to learn to accept that you might be wrong half or more than half of the time when trading in stocks.

You have to be willing, and able, to accept that you are wrong. And worse. Your account would be poorer as well.

If you think you can do that, think again!

Because, it is also true that more than ninety percent of traders are net losers. And the primary reason for this is that they did not accept that they were wrong in time to preserve their capital.

Every successful stock trader eventually figures out that their need to be right is ruining their chances of making money trading stocks.

Once they overcome this fatal human flaw, at least as far as stock trading is concerned, they begin to count their market blessings!

The key takeaway is: You can be wrong about the market a few times, and still come out ahead in the long run. And make loads of money.

You are dealing in probabilities, and have to use win-lose ratios, and money management methods to put you on the winning side of this equation.

We will work our way through all those in the coming parts in this series.