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12 Basic Stock Investing Rules Every Successful Investor Should Follow

Posted on November 25, 2021 by Donald Travers

There are lots of important things you want to know to trade and invest successfully in the stock exchange or some other market.

- Buy low-sell high. As straightforward as this concept seems to be, the huge majority of investors do the exact opposite. Your ability to consistently buy low and sell high, will determine the success, or failure, of your investments. Your rate of return is determined 100% by when you enter the stock exchange.

- The stock exchange is always right and price is the only reality in trading. If you wish to earn money in any industry, you will need to mirror what the industry is doing. If the industry is going down and you're long, the industry is right and you're incorrect. If the stock market is going up and you're short, the market is right and you're incorrect.

Other things being equal, the longer you stay right with the stock exchange, the more income you will make. The longer you remain wrong with the stock exchange, the more money you will lose.

- Every sector or stock that goes up will return and many stocks or markets that have gone down, will go up. The more intense the move down or up, the more intense the motion in the opposite direction when the trend changes. This is also called"the tendency always changes rule"

- If you're searching for"reasons" that markets or stocks make big directional movements, you will most likely never know for sure. Since we're dealing with understanding of markets-not necessarily fact, you're wasting your time searching for the many reasons markets move.

A huge mistake many investors make is assuming that stock markets are rational or they are capable of discovering why markets do anything. To make a profit trading, it's only necessary to understand that markets are moving - not why they're moving. Stock exchange winners only care about duration and direction, while market losers are obsessed with the whys.

- Stock markets generally move ahead of news or supportive principles - sometimes months beforehand. Should you wait to invest until it's wholly clear to you why a stock or a market is moving, you need to assume that others have done exactly the exact same thing and you might be too late.

You will need to get placed before the biggest directional trend move occurs. The market reaction to good or bad news in a bull market will be positive more often than not. The market reaction to good or bad news in a bear market will be negative more often than not.

- The trend is your friend. Since the tendency is the cornerstone of profit, we want long term tendencies to create sizeable money. The key is to learn when to get aboard a fashion and stick with it for a lengthy period o ftime to optimize gains. Big money can be reached by grabbing large market moves. Day trading or short term stock investing can Catch the shorter moves while awaiting the longer term tendency to establish itself.

- You have to let your profits run and cut your losses quickly if you're to have any chance of being successful. Trading discipline isn't a sufficient condition to generate money in the markets, but it's an essential condition. If you don't practice highly disciplined trading, then you won't earn money over the long run. This is a stock trading "system" in itself.

- The Efficient Market Hypothesis is fallacious and is really a derivative of the perfect competition model of capitalism. The Efficient Market Hypothesis at origin shares lots of the identical false assumptions as the perfect competition paradigm as described by a famous economist.

The perfect competition model isn't based on anything that exists on this earth. Consistently profitable professional traders only have better information - and they act on it. Many non-professionals trade strictly on emotion, and lose a great deal more money than they make.

The combination of superior information for a number of investors along with the usual panic as losses mount due to buying high and selling low to others, creates inefficient markets.

- Traditional technical and fundamental analysis alone may not allow you to consistently earn money in the markets. Successful market timing is possible but not using the tools of analysis that most folks employ.

If you remove optimization, data mining, subjectivism, and other similar statistical tricks and information manipulation, most trading thoughts are losers.

- Never trust the advice and/or ideas of trading applications vendors, stock trading system vendors, market commentators, financial analysts, agents, newsletter publishers, trading writers, etc., unless they trade their own money and have traded successfully for decades or provide third party verification of functionality.

Note the ones that have traded successfully over quite long intervals are quite few in number. Remember that Wall Street and other financial companies earn money by selling you something - not instilling wisdom in you. You need to make your own trading decisions based on a rational analysis of all of the facts.

- The worst thing an investor can do is have a huge reduction on their own position or portfolio. Market timing can help prevent this too common experience.

It is possible to avoid making that enormous mistake by avoiding buying things when they're high. It needs to be obvious that you should only buy when stocks are low and only sell when stocks are high.

Since your starting point is essential in determining your overall return, if you purchase low, your long term investment outcomes are irrefutably greater than someone that bought highquality.

- The most prosperous investing methods should take most people no longer than four or five hours weekly and, for the vast majority of us, only a couple of hours a week with little to no pressure involved.