“I made my fortune by selling too early”
Baron Rothschild
Or, as we advise our members at TheGreenBaron.com, “Any sell in the green is a good one.” The concept, or strategy here is, It’s hard to lose money selling a stock that is going up. The key is to remain objective and not become so attached to any stock (fall in love) that you hesitate to sell the stock when necessary or prudent. Taking risk capital off the table and locking in profits, even partially, is a sound a proven and investment strategy for limiting risk. Which leads us to;
"Money is not the most important thing in the world. Love is. Fortunately, I love money"
Jackie Mason
Love is an emotion. Which means it, like other emotions, have no place in your investing system. Playing the stock market is a lot like playing the field - focus on dating not marriage. Think of your stock investments as more employee than business partner. Remember, you will eventually sell every stock you buy - it’s only a question of when. It‘s hard to get too attached to something you know you‘ll soon be getting rid of before you even buy it.
"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case"
Robert G. Allen
Higher returns usually involve higher risk. That comes with the business of speculating. Now that you’ve decided to take the investing road less traveled (and more risky) what can you do to avoid becoming road kill? A good place to start is by learning then implementing the principles detailed in this article.
"October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February"
Mark Twain
The three most important rules to successful investing are; Timing, timing…and timing. And the most important rule regarding timing is to realize you will probably never buy a stock at it’s absolute bottom and you’ll probably never sell one at it’s absolute top. Although that is the ultimate goal, keep expectations realistic and attainable. A good rule of thumb regarding the timing of your trades is to know your exit before you even enter. Before you purchase any stock, have a realistic target in mind for when you plan to sell it. If you don’t know where you’re going, how will you know when you get there?
"It's not how much money you make, but how much money you keep"
Robert Kiyosaki
Unrealized gains are not losses. Unless you hang on too long. Then yes, gains can become losses, usually in much less time than it took to make them. As previously mentioned, any sell in the green is a good one; In other words, sometimes greed is bad. Many investors lose dollars (or more) hanging on too long in the hope of making a few extra pennies. Knowing when to sell a particular stock is just as important as knowing when to buy it. You may hold a stock for several days/weeks waiting for it to go up a large percentage - only to see it drop that same percentage (or more) in a matter hours if not minutes. It’s never a bad time to lock in profits.
"The four most dangerous words in investing are 'This time it's different"
Sir John Templeton
When you hear hoof beats think horses not zebras. Or, as Occum’s Razor implies; the simplest and most logical explanation is usually the correct one. Start trading with your eyes (what you see the stock doing) and not with your ears (what others say the stock will or is supposed to do), or even worse; your heart. If it “looks” like a bad time to buy a stock - it probably is. If it “sounds” too good to be true. It probably is.
"Sometimes the best investments are the ones you don't make"
Donald Trump
Or as we say at TheGreenBaron.com when it comes to choosing which stock ideas to invest in, “Don’t chase - Replace.” If you miss one bus, don’t chase it down the street. Simply wait for the next bus. Wall Street is nothing but bumper to bumper buses. Success has its pitfalls as well; One of the worst things that can happen to a new investor is to hit a homerun on their first swing. It can often create a false sense of security when it comes to taking future risks.
"The United States has developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market"
Jay Leno
One of the worst reasons to believe a stock is going to dramatically increase in value is because some stranger said it would - or even worse, because you really really need it to. If you really really need a stock to go up significantly it’s probably because you have over extended yourself in a single stock or risked more funds than you can afford to lose, which is a total violation of investing rule number one; never ever invest more money than you are prepared to lose. Violating this rule has wiped out more investors than all the market crashes of the last century combined.
Hopefully you’ve taken the principles outlined in this article to heart and will seriously consider applying them as part of your investing strategy. If so, you should dramatically increase your profits as well as your trading skills at the same time significantly limiting your risks. If you do end up trading your way to fame and fortune just remember the real bottom line on Wall Street;
"The trick is to stop thinking of it as 'your' money"
IRS auditor
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