Picking the Winners or Avoiding the Losers

Trading stocks can be a very rewarding, but often frustrating event. It is almost certain that you will find yourself saying "why did I sell that?!," or "why didn't I buy that?!." Believe us when we tell you that you are not the only one. Hindsight is one of the hardest things to deal with as a trader. Not every trade you make is going to be a winner, or the big jump you expected. In order to combat anxiety as well as trading on emotion there are a few tricks we have found to work. The first is not staring at the screen. Easier said than done. If you are worried the stock may plummet while you are not watching then you should handle this by placing a trailing stop order. You should never enter a trade without having a threshold you are willing to lose on that particular trade. If you know the stock has a tendency to move quite dramatically then set your stop price with enough room to adjust for that. Patience. This is the most important part of trading. How many times have you made a trade and later in the week ask yourself why you sold it on a dip? You never lose money in the stock market until you sell. Tell yourself that every-time you are about to make a transaction. If you are confident in your stock and the company you are investing money into, then you should be able to hold onto it until the gains you desire are reached. If not, you should not be investing in that stock in the first place. Don't chase! Never chase a stock because it is moving up fast. You may get some of them right, but more often than not the manipulation is going to take you and the stock price down. In essence, always ask yourself if you could hold that stock for 10 years and be confident it would be worth more than what you bought it at. If you are not sure of the answer, do not invest in it! Avoiding the wrong stock is just as important as picking the right one!