chrisohbaby!

I’ve made a lot of mistakes in the market, it’s just what I do. I have to learn lessons the hard, expensive way… sometimes a few times over to get it into my head. But thats another story. I compiled a list of my top 10 tips to investing that I hope will save people money in the market. It’s a tough world out there and some people say that the market favors the institutional investors and the big boys at the cost of the small players. I found this to be pretty much true, so you have to know exactly what you’re doing or you’ll get pushed and pulled all day long. Please give this a read and let me know if I can help in any way. I’m in a teaching mood lately .

1) Always try to invest in what you know. Don’t get into industries or areas that you know nothing about, or don’t care about, as you will not have that natural edge that comes with being familiar with what you’re investing in. You need to be able to have faith in where you put your hard earned money in, to be able to sleep at night… at least I do.

2) Check your emotions attachments. Once a stock had its run, it’s time to take your profits and move to the next big thing. A lot of time, people will develop an emotional attachment to a stock since it brought them a ton of money, and they foolishly stay invested in that company even though all the indications (and maybe even their gut) is telling them to move on.

3) Don’t chase a stock. When good news hits and a stock is on a massive uptrend, it is almost always better to let it go and stay on the sidelines… unless you’re planning on daytrading it for a quick pop. Investing late on an uptrend puts you in a precarious position when the pullback happens (usually later in the day or the next day). Stocks rarely push higher more than one day in a row unless the news is ridiculously earthshattering. If a stock jumps 100% in one day, it is almost guaranteed to be in the red the next day or after hours due to people taking their profits on the stock and daytraders cashing out for the day.

4) Don’t hold a stock past its prime. Once you feel as if a stock made a good run and it has slowed to the point where you could put the money somewhere else where it will give you a better return, sell. Nothing is worse than knowing that you missed an opportunity because your funds were tied up in a stock that hasn’t moved in weeks. You can always buy back into the stagnating stock if you so choose, but you’ll have more money to do it after you made your money work for you in the other opportunities.

5) Sell on a downtrend. A lot of people will tell you that you haven’t lost money on a stock until you sell it. That’s absolutely wrong.

If I bought 100 shares of Company X at $10 a share ($1000) and the share price tanked to $5, my shares are worth $500, not $1000. So yes, you lost $500. If a stock is tanking, it is better to sell on the way down so you can accumulate more shares at a lower cost.

If you have 100 shares of the same company above and it’s falling, sell it on the way down… lets say $7.50, so you sell and pocket $750, which is much better than $500. So with that $750,  you can buy more shares at $5 so when a stock is at the $5 mark, you will have 150 shares ($750 /5), instead of $100 if you chose to hold onto the shares and didn’t sell.

6) Sell high, buy low. If you look at any chart, you will notice that stocks go up and they go down. Once you learn to detect the uptrends and downtrends, you can sell at a level you think is high enough so there will be a pullback, and then buy after the pullback to increase your number of shares. An investor who is able to see these trends and ride the waves, will be able to maximize their gains over one that just stays in a stock and lets the market do the work.

7) Research! Do your due-diligence. You’ll be tempted to invest in a company after reading about it in an email, messageboard, or a tip from a friend. Of course, you can invest in that company blindly, but you really really really should do your own research. You might find something fishy about the company that the others didn’t see/ignored. At the very least, you’ll have peace of mind that you put your money into a sound investment rather than the latest hot stock from Twitter.

Never feel bad about taking profits. If a stock is going up and you think it wont go up more, sell. Even if it does go up more, you still realized a profit. Never regret taking profits as that is money that you just made in the bank. You can always buy back in for a ride if you think theres more gas left in the tank, but now you might be able to do it with house money that you just made. Do not let greed make you hold a stock longer than you should, a lot of times, you will end up losing money in a pullback and you have nothing to thank but greed. Greed is a trader’s worst enemy. I personally don’t do it, but a lot of traders set guidelines for trading where if they make a 15% ROI on a stock, they sell automatically. This takes greed out of the equation altogether if you follow the guidelines.

9) Keep a cool head. Don’t panic. The worst thing you can do is have an emotional trading day, where you freak out and sell too early or buy too high. This may relate to a few of the other tips above, but I cannot stress this enough. Do not throw emotion into the mix when you are investing. Stocks will go up and they will go down, don’t get emotional and sell when your brain and all indicators are telling you to hold for a rebound. Always stay calm and think things through.

I know what it feels like to be bleeding money from every angle possible, your heart is telling you to dump everything, but your brain is telling you that a rebound is imminent. It’s very easy to listen to your heart, but fortunes are not made by emovesting, they are made by cool headed, rational decisions made during intense periods in market activity. Once you’ve been through a few of these moments,  you will be able to handle the stress more easily in the future.

10) Penny stocks are good investment. A lot of good compares are listed on the OTCBB, usually brand new companies or companies that have changed hands with a new company operating within the shell of a previous traded one. When investing in pennies, there is a very high probability that you will lose money, so do your due diligence and make sure you keep updated with their news releases and even their IR firm. When you are seeing swings of +/- 20%+ a day, you will need an iron stomach to stay in the game and not sell all your shares. You have to learn to go with the waves and handle the volatility and stomach the tides, otherwise you will sell too early, the stock will pop, and you’ll be kicking yourself.

If you choose to invest in pennies, you MUST be watching it every few hours, you should never leave your investment and forget it. This is due to the extreme volatility of OTC stocks.

I hope this guide helps some people out there, I made almost every mistake on this list and I’d love it if I could help you from making any of the same mistakes. As ways, feel free to contact me if you have any questions/comments/additions you would like to make. Have a great night!