Let's play a game. It is called "heads" or "tails". I will flip a special coin. It has a 95% chance of being a "heads", a 5% chance of being a "tails". That is, it has a really high tendency to be a "heads".
If it is "heads", you give $1 to me. However, if it is a "tails", you get $10 from me. We will play 100 rounds. Will you play with me?
Most people when interviewed will not play. Yet, they are constantly playing this game, when they dabble with stock market investment. It is an accepted fact that 95% of the stock market investors loses money while only 5% made money. If you are thinking of buying stocks to make some money, why do you think you will belong to the 5% who are successful?
Now, you can avoid all the mistakes people usually made (myself included) by reading about my journey to acquiring the first million dollars.
Recently, I interviewed one of my colleagues who were considered a successful investor in 2007. He started buying unit trusts at end of year 2003, when the bottom of the Singapore stock market is formed, and he rode the bull-run all the way to 2007 with 30% profits. However, he did not cash out his investment and now he is faced with 30% paper loss.
It seems to me that winners today can be losers tomorrow. Losers today become bigger losers tomorrow. Nobody's a forever winner.
People enter the stock markets without understanding their profit/loss objective. Before you buy any stock, you must determine how much loss you are willing to take before admitting that the decision to buy is not sound. You must also determine when you will get out when you have profits. A good guideline is to take the loss when the stock has dropped 10% from your entry price, and to take profits when the stock has dropped 25% from the highest price.
If you neither stop your losses or take your profits when you do have one, you will definitely belong to the majority of people who invest in the stock markets and are perpetually losing.
With this simple rule, you will stop paying school fees to the market! For more tips, go here. BOOKMARK the site and come back as often as you like!
Roy Peh is a part-time stock and forex trader. His blog can be found at http://sgmillion.blogspot.com where he shares his experiences and adventures in trading and investment. Article Source: http://EzineArticles.com/?expert=Roy_Peh |
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