Hi all, I want to earn good returns from the investment in the stock markets but do not have a clue as where to invest properly. I have been watching the failures and successes of a few people which made me come here. I need suggestions that can help me to get a good hold in the stock market. Thanks in advance!

The following are a list of nine things you want to avoid at all costs. Anyone of them can literally destroy your financial dreams and goals!

1. Trading with money you can't afford to lose.
One of the greatest obstacles to successful trading is using money that you really can’t afford to lose. Examples of this would be money that is supposed to be used to pay the mortgage, bills or your child’s college tuition. This is sometimes referred to as “trading with scared money” and there is a very good reason for that. Ultimately what happens is that when someone knows in the back of their mind that they are risking the rent money, they trade out of fear and emotion versus logic and no emotion. If you are in this situation I highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks. You can start with as little as $2000 and trade stocks under $30.

2. The need to be "certain".
We all have the need to make sure that the trade we want to make is going to be a good one. Therefore we look for signs that will give us a confirmation to enter. This can come in several forms, for example… Tuning into CNBC or the Wall Street Journal to give us news that our stock is on the move or waiting for a couple of extra days to make sure that the stock is really flying and just not on a false breakout. Other traders will get opinions from friends, family or broker. Others will wait for ten technical indicators to line up and give the “green light”.

All of these are okay to a point, however the big mistake to avoid is taking so much time that you let the trade take off without you. Interestingly, what ends up happening as a result of waiting too long is that you actually increase your risk. This is because as a stock moves higher and higher there are fewer buyers left in the market and it can come tumbling down until more buyers step in. It is like a game of musical chairs; eventually someone gets caught without a chair.

Traders who wait and wait and wait to make extra sure are usually the ones buying the top tick just before the stocks sells off. They then beat themselves up thinking they picked the wrong stock. Odds are it had nothing to do with their selection, just bad timing.

The thing to keep in mind is that there can be no absolute certainty in any given trade. All we ever can do is take a very educated risk along with a leap of faith!

3. Spending profits before you make them.
Nothing is more exciting then getting into a trade that blasts off and puts you into a highly profitable situation. This can cause major problems however, because this type of trade puts you in a highly euphoric state and leads to daydreaming about the huge profits still to come. You say “Wow I’m already up 15% in two days; I’ll be up 50% in a week and probably double my money in no time!” Then the next thing that happens is you are deciding on the great new car you are going to buy or perhaps telling your boss that he can stick it… Well you get the idea!

The real problem occurs as you get caught up in the daydream and expectations. This causes you to not be prepared to get out as the market sells off and eats up your profits because you have convinced yourself of the eventual outcome and will deny the reality of the situation.

The simple remedy for this is to know where and how you will take profits once you enter the trade. Also, realize that the market will only go up as long as it wants and not how high you think it should go.

4. Forming an opinion.
I’m here to tell you that the market does not give a damn about you or your opinions. Even if they are based on painstaking research or from a “Wall Street Guru”, it doesn’t matter!

5. Three 4-letter words that will kill you! HOPE---WISH---PRAY
If you ever find yourself doing one or more of the above while in a trade then you are in big trouble! As I have already said, the market doesn’t give a damn. All the hoping, wishing and praying in the world is not going to turn a losing trade into a winning one.

When you are wrong just use a simple 4-letter word to correct the situation-SELL!

6. Not sticking to your plan
A big source of trouble arises when a trader starts to deviate from their strategy. Maybe for a week they will trade according to one set of rules and the next use something entirely different.

This flying by the seat of the pants always ends up backfiring. This is because the trader can never be certain what is working and what is not.

You must never deviate from your methodology once you start. As long as it is a good one statistically there is absolutely no reason to change it. The way to make money from it is to trade it over and over again to exploit the edge it gives you.

One thing to also be aware of is that a trader is most vulnerable to switching approaches after a few loses. So, pay special attention at these times.

7. Not knowing how to get out of a losing trade.
It’s amazing how many people I have talked to who don’t have any clear escape plan for getting out of a bad trade. Once again they hope, pray wish and rationalize their position. As I keep saying the market does not care what you think. It does what it does and when you are wrong you are wrong!

The easiest way to keep a bad trade from going really bad is to determine before you get in, where you will get out. You can use a dollar amount or at some target point such as the low of the previous 15-minute bar.

***Make sure you don’t get the “stunned deer in the headlights syndrome”. This is where you see the stock fall to your stop loss point, but you are unable to take action. Maybe this is due to fear or disbelief that you are wrong, but unless you get out ASAP you could end up I major financial trouble!

8. Having an ego.
I have seen a number of individuals enter the trading game that were extremely successful in other business ventures. Because of this they had a fairly big ego and thought they couldn’t fail. Their egos became their downfall because they couldn’t except that they were wrong and refused to bail out of bad trades.

Once again, whoever or wherever you came from does not concern the markets. All the charm, powers of persuasion, number of diplomas on the wall or business savvy will not budge the market when you are wrong.

9. Falling in love with a stock or trade.
Let me give you an example of what I mean. Back in the spring of 1999 EFAX was a really hot stock. I waited to buy it on a dip and did so at $19/share. It started to move up strongly and life was great!

After a while though, it started to come back to my entry point and then below it. Here’s the problem. For some reason I really liked EFAX and sort of became attached to it. Ultimately I couldn’t let go of it even though I knew I should. I justified and rationalized why my dear friend should bounce back, but it never did. I finally had to break off my love affair when the stock hit $9.

Trisha Rich
http://www.learntoberich.com.au :roll: :roll:

Hi Trisha,
Your article is very useful and I am sure it will help a lot to other as well.

Regards
Bankbars

Nice info there. If i may ask, what kind of Plan do you recommend for this purpose.

Before going to invest in the market I mean in stock you need t o go for an competitive analysis on various company's stock. What you need to do is that make a company analysis. Many sites you will found in the web who build to do this. I think you should do it so that you can make a right investment.

There are no simple wrongs or rights in investing. The best way is to improve your knowledge and use some proven techniques. Id suggest you to read a few books on trading and investing. Here is one I personally love : The Power Curve - Scott G Kyle, gives in depth explainations on the workings of the stock market and shows ways to make lucrative investments.

Johnb, thanks for pointing out -->> "The Power Curve" by Scott Kyle that talks about options trading. It also touches on the fundamental, technical, and psychological areas of trading and was really helpful for someone like me whose knowledge on options was very basic. I highly recommend the book to anyone who wants to learn more about options or just trading in general. If you go on the website, thepowercurve.com you can actually read more about the author and check out the first chapter of the book.

Listen before making an investment in the market first of all you need to know about the company's current situation. After doing that you can go for investment decisions.

Did anyone else get a chance to look at "The Power Curve"? Or check out its website? I'm curious as to what you guys think.

To make good profit in stock market one have to make sure that his or her eyes is onen always.It means one have to see the current situation of stock market very closely.It will help to make good decision what is the most important thing in stock market.

Most people who invest in the stock market lose money in the long run.
Don't rush headlong into buying anuthing until you have done ample research. A good site to read is Dow theory letters - run by Richard Russell - he really knows his stuff.

Investing in Mutual Funds
Mutual funds are groups of different stocks managed by a single individual. Investing in a mutual fund means you don't suffer the umbrella of risk of any specific company, but instead you have invested in a group of several companies via a mutual fund brokerage house. It gives you more options to diversify your investment portfolio, but you have less stake in any one company and less potential for gains. Of course, less risk means less of a chance of scoring big, but it protects the capital you already have invested. When selecting a mutual fund, you should decide what sort of risk you are willing to be exposed to.
Investing with Stocks
If you decide to invest in the stock market, enjoying the thrills of buying high and selling low, you can use a professional broker to handle the transaction and research work for you. Someone will need to select the companies in which you invest, so use an expert. Choosing your favorite businesses may not be the most advantageous move. You should make you selection based on solid research which either you can do using the Internet or your broker will do it for you.


Investing through Real Estate

Investing in real estate takes a lot more hands-on effort than investing in stocks or mutual funds. You can purchase a piece of property and rent it out as a style of investment. You then, are responsible for all the upkeep of the rental property and the mortgage payments. Although this is a reasonable option, it is also a lot of physical labor and might not be very lucrative for the first few years. Another idea is investing in real estate investment pools. This is more like investing in mutual funds, where you are not the landlord, but insted pay a firm to do the dirty work. A property management firm does the regular managing and you just collect the benefits.