Professional Stock Investment Advice - Most Common Trading Mistakes

by: David Jenyns

The best Stock Market advice you will ever read is to learn from mistakes when someone else has made them. So, this stock market advice list I made a list of some of the most common trading mistakes that are made. Even I’ve made some of these. If you have already made some of the mistakes, you can rest assured that you aren’t alone in making them. If you haven’t made them, then here’s a way to get around having to learn by making the mistakes yourself, by reading my stock market advice list.

The Stock Market advice tip #1, and worst mistake that people make is that they believe trading is the easy answer, a way to get rich quickly. People will often expect to become wizards in the market overnight, but they fail to realize that trading is like any profession; you must learn how to do it first.

For example, would you attend a weekend doctor’s seminar and expect to conduct heart surgery on Monday? Of course not! I am shocked at what people expect when they go to a weekend trading seminar. They think they will create wealth without having to work, invest or think, and it just doesn’t happen that way.

After treating trading like a get rich quick scheme, my next stock market advice tip #2 and most common mistake, is to approach the market without a plan. Without a trading plan, traders approach the market in an inconsistent manner. One day they trade stocks and the next they trade the foreign exchange. Or, they may use one set of indicators one day, and the next day they will throw these indicators out the window and take on a completely new set. Without a consistent approach, the only thing governing their trading decisions is really emotions, and that will doom them to failure.

If a new trader has managed to skip these last two mistakes, they often fall down when they try to go it alone. This is my Stock Market advice #3, all traders should find themselves a coach, or a mentor. Someone who can help them spot the errors in their system that they might not have noticed. An outside point of view can help you avoid other costly mistakes, and greatly increase your profits.

These are some common and quite basic mistakes. The next errors I’ll mention are ones that are just as prevalent in the trading industry, but they often occur once traders have been around for a while. I have some personal experience with these mistakes. Let’s call this stock market advice list, the three most expensive mistakes I’ve made.

My stock market advice mistake tip #4, or the first most expensive mistake, I made was to search for the “Holy Grail” of trading. This was an incredible waste of both time and money. During the first three years of my trading career, I spent over $25,677 on a library full of books, videos and seminars as well as spending thousands of hours in search of the perfect trading methods. Honestly, 95% of what I bought was pure junk… I should have listened to my mentor earlier and realized the “Holy Grail” of trading is simply excellent money management!

My stock market advice mistake tip #5 or the second most expensive mistake I made was not having a predefined exit point. Early in my trading career, I remember trading a stock I thought had a high percentage chance of rising. I was too confident. I fully leveraged the position. Unfortunately, when things did not go as planned, I did not know when to exit, and was paralysed. I kept rationalizing why I should hold onto that stock. As the stock continued to fall, I made more and more excuses. At the very end, I remember thinking, “I can’t take it anymore!”

I sold out. That, of course, was the point the stock turned.

I learned two very valuable lessons that day. First, always have your exit points predefined. Second, big losses once started out as small losses, and it is much easier to take a small loss than a big one.

My Stock Market advice mistake tip #6 or the last most expensive mistake, I made is not one that took money out of my pocket; instead it was a mistake that made me leave money on the table. In fact, this reoccurring mistake cost me big.

Early on, I remember selling positions as soon as they showed a profit. I would not let my profits run, as I was too afraid to give the money back to the market. I figured the profit as mine. The result was that I ended up selling the stocks that were making me money.

It wasn’t until my mentor explained to me that when you are trading, and showing a profit, that is the point where you should be adding to the position, not closing it out, that I began to understand what I was doing. Once I started following his advice, my trading profits soared.

Trading is not an easy profession, but it give you great rewards. Avoid these common errors on my Stock Market advice list, create a simple, well-designed trading system, and learn your market. If you take the time to study the market, and learn from other’s mistakes as well as your own, you will become a successful trader.
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About The Author

David Jenyns is recognized as the leading expert when it comes to designing profitable trading systems. Discover the "secret formula" of trading that anyone can use to consistently generate BIG profits from the market by downloading your FREE copy of David's new Ultimate Trading Systems course. Click Here To Download ==> Trading Systems http://www.ultimate-trading-systems.com

Lessons of the Legendary Traders

by T Meier, 18-Nov-2004
http://www.easy-trader.ch

What do the worlds best Trading masters differently than the average investor? Can the average investor learn from the Player Legends success stories and their techniques used? What do the most famous Players have in common that can be applied by the average talented trader?

Before we should give some insights on those questions lets have a look at some of the most successful Trade jockey Legends:

Nicolas Darvas turned an $ 36000 account into $ 2000000 in 18 months!!!
Ed Seykota, a Turtle Financier, turned $ 5'000 into $ 15'000'000 in 12 years!!!
Jesse Livermore made several multi-million USD fortunes in the early 1900's
Richard Dennis, another Turtle Player, made between $ 100 and $ 200 000.000
George Soros is believed to be one of the greatest Trade jockey of all time!!!

The results are quite impressive and some different amazing Financiers should be added easily to the list above. Why do these guys have such tremendous results?

There are common factors, that can be observed through most of the successful Pitbull Legends:

They have a Strategy that they strictly follow.
Most of them have a trend-following average trading style.
Most of them have a mid- to long-term approach. Some of them burned their fingers over the preceding 3 years and some even lost a fortune. Here are some examples of observed behaviour patterns:

Losses are not slice early enough.
Investment with a short-term horizon become long-term horizon in hope of raising asking prices.
People listen to the advise of their invested $ Trade facilitators and Analysts.
People risk coin in hot issues recommended by colleagues of their colleagues.
People have no plan for their investments.
Money Management is not considered at all.
Greed and fear is omnipresent.

What can average talented trading insiders learn from the above and how can the mistakes listed above be avoided? The after key notches can be learned from some of the most successful Trading expert Legends:

Each investor has its own personality. Some of the investor have a very aggressive paper trading style and are stockmarket trading very frequently. Some prefer shares as different are increased risk oriented and speculate in contracts. Other players want only spend a minimum of effort. An investor need to reflect on his outline and choose a note trading approach that fits his personality.

A trade needs to be completely planned in advance. g. when they go on holiday, when they move house etc. But do they have a plan when they invest? An investor needs to have a method that helps him to be prepared for all scenarios of a exchange. One needs to know in advance when to buy, how much to buy, when to exit. Once a buy / sell is executed the bottom line of the instrument (stock, promise note, fixed interest paper etc.

The most important component of a stock trading method is Cash Management? Surprised? Lots of pitbulls and super traders spend most of their time developing a very advanced trade entry strategy. But the entry methodology contributes only approximately 15% to the success of a Note trading Method based on academic studies.
The most important question of a Paper trading Technique is how much to risk bucks and how many deals to trade at the same time.

A can do attitude is required to buy / sell successfully. Why? Because with phrases like it should be great, but I cant or one day perhaps I should succeed in the lottery, but until then I must work hard they have already lost.
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This article courtesy of http://www.traders101.com.

Investor Psychology

by T Madell, 22-Nov-2004
http://funds-newsletter.com

I have written many times about nothing that most market financiers largely ignore: The role of the investor's own characteristics in determining how well he/she does as an investor. Perhaps this statement seems a little abstract and therefore it is easy to disregard it especially coming from someone such as myself whom most readers most likely have yet to hear of. But when you realize that similar statements have come from 3 of the world's most successful security market financiers, Peter Lynch, Warren Buffet, and John Templeton, perhaps folk may want to pay a bit more attention.

Peter Lynch, in his book "One Upwards on Wall Street", discusses the characteristics of successful trading insiders. As most stockmarket investors are aware, Lynch served for 13 years as manager of America's top ranked mutual fund at the time, Fidelity Magellan. An investment of $10,000 in the fund in 1977 may have grown massively to $280,000 by 1990. In this book, Lynch states: "Ultimately it is not the Economic Marketplace nor even the corporations themselves that determine an investor's fate. " And: "It is personal preparation, as much as knowledge and research, that distinguishes the successful share picker from the chronic loser."

Lynch further states: "The key to making moulah in issues is not getting scared beyond of them . ;" he continues: "in dieting, as in equities, it is the gut and not the head that determines the results. "

Lynch advises United States to try to examine our own behavior and attitudes before we enter into instrument trading. Answer these questions: Are you trading for the short-term or the long-term ? How can you respond to a sudden and unexpected severe drop in figures of ones shares? (We should all know much better where we each stand on this now that it has been happening, though not so suddenly, for a long time.

The above statements, though written by Lynch for those who speculate in individual equities, are nevertheless just as valid for mutual funds speculating insiders.

What additional qualities did Lynch suggest make for a good investor? Lynch lists the following: patience, self-
reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, a willingness to admit mistakes, the ability to ignore general panic, and
the ability to make decisions without complete or perfect information.

Some final words from Lynch are perhaps relevant: ". . it's crucial to be able to resist ones human nature and our 'gut feelings. "

Warren Buffett, perhaps the world's most hallowed investor, learned that the successful investor is often the individual who has achieved a certain temperament. His teacher, Benjamin Graham, taught him that the investor's
worst enemy was not the stockmarket, but oneself. Thus, regardless of superior skills in mathematics, finance, or enterprize acumen, if you can't number 1 master ones own emotions, you are not well-suited to best earnings from our nvestments.

John Templeton, a masterful international investor, believed that adopting a flexible, open-minded point of view to fit different times, countries, and investment climates, was the investor's greatest desire. He stated that the best value might be found in shares that are completely neglected and that different market financiers may not even be aware of.

Templeton admits he makes constant mistakes, but because he is heavily diversified, the damage is limited. He advises not to trust rules and formulas. The world of speculating is always changing leaving the investor who sticks to time-
honored truisms sadly way behind. Everything has its season, as the classic Byrds song "Turn! Turn! Turn!" reminds United States. Since the world is constantly changing, the successful investor too must change when required.

For more information on whether you've the characteristics needed to be successful as an investor, observe the net site shown above.
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This article is courtesy of http://www.traders101.com.

Why Paper Trading Is Smart

by: Yvonne Volante

Do you paper trade? Paper trading of securities is an excellent way of jumping in and learn the ropes of investing. Some thoughts about learning investing through paper trading.

Some people read books on trading and investing, go to various seminars, paying hundreds or sometimes even thousands of dollars to get educated, but still don't get to the point where they actually put in their trades. They like the idea of acquiring knowledge, pondering investment strategies and thinking about various trades they might like to make. However somehow they just don't seem to do anything with the knowledge they acquire. They don't put their investment strategies into action and they never really make the trades they are constantly thinking about.

Paper trading is a form of simulation and therefore, like all simulations, it has certain advantages:
- It offers great learning potential.
- There is no financial risk involved. You can't lose money.

However, inherent in all forms of simulation is also a number of disadvantages. For paper trading disadvantages are:
- Unlike most other forms of simulation, there is no real way to speed up the process. Of course you could start with historical prices, but the whole exercise tends to get a bit artificial that way.
- There are no financial benefits. You can't make money.
- There are no financial risks. You can't lose money.
- It just isn't real.

The first and second disadvantage seem obvious. The third may appear strange at first, especially since it was also listed as an advantage. Some of you might wonder: "How can the absence of financial risk ever be a disadvantage?". To answer that question we just have to look at the fourth disadvantage, which ties them all together. This last one really is the big one. The lack of any true financial implications seriously inhibits the learning effect. No matter how much you think, speculate, simulate or however you would like to call it, until you actually put your money where your mouth is, it just isn't real. We tend to learn most from our mistakes, especially mistakes that hurt. If it doesn't hurt it just doesn't have the same effect.

It's like people watching a boxing match on television claiming they would never give up if they were up there. Statements like: "You can knock me out, but you can't make me give up" are easy to make. The truth is that most people making such a statement have never experienced a situation even remotely like it. If they would actually find themselves in that ring, facing an opponent, most of their bravery would vanish in less than an instant. As soon as they would start to feel some of the pain that those fighters have to endure, most would quickly sing to a different tune and leave the ring.

"But that's physical pain. That's different." you might say. Fact is that emotional pain can be just as intense and even worse. Take someone that has lost something dear to him; whether it is a loved one, a relationship or his life's savings. Then ask him the following question: "Knowing what you know now, if you could do it over again and you could choose between physical pain, in the form of a beating, or losing whatever it is you lost, which would you choose?". Most would opt for the beating without a second thought. Doesn't make sense? Well maybe not, until something like that happens to you or someone you know.

Ther is no doubt that paper trading is a good, safe alternative to starting out cold when beginning investing. Just remeber, when you start for real and are earning or losing your own money, you're in the big leagues and things start to change. Hang on for the ride and good luck!

To learn more about other types of investments, be sure to check out http://www.amutualfunds.com
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About The Author
Yvonne Volante, the author, is an investor and writes for ycinvestment.com, which is the premier investment resource on the internet. You can see all of the articles over at http://www.ycinvestment.com

Steal Warren Buffet's Stock Market Lesson Plans?

by: David Jenyns

Why should you want to steal someone else's stock market lesson plans?

First, let me tell you that a trading plan is only useful if you follow it. Following your plan will make you successful, yet many traders circumvent the stock market lesson plans that they have carefully created. They become emotional invested in a trade, to the point where they ignore all warning signs. Remember, when the market corrects itself, which it always does, no position is immune, no matter how strongly your ego may be tied to it.

Many investors have stock market lesson plans that watch as their portfolio values are cut in half or more, yet they will still hold their positions. They may fear being left out of a big gain, or be so deep in loss that they felt they couldn't possibly sell at that point. But even if you believe that all positions will recover from their losses, and the truth is that not all of them will, this is a terrible way to trade.

You tie up too much capital, and your rate of return plummets. Just as you shouldn't become emotionally involved in a trade, you should also never become tied to ideas. By this I mean becoming so fond of a particular strategy or trend that you cling to it even after it has stopped working. You need to have strategies, and to have plans, but you must also be aware of the shifts and swings of the market, the beginning and the ends of trends.

When you first form your plan for a trade, you should consider what price or price range you think the stock is likely to reach. This is often called a target price, which gives some traders the wrong impression. A target price is not a price that the stock has to meet. A stock does not have to do anything. If you treat your target price as a goal, it can lead to many problems. Your target price should only be used as a guideline.

The target price helps you figure out your risk to reward ratio, and it gives you an exit point in your trade. At the least, it should give you a point where you'll reassess the trade's ability to continue to moving upward. But your trade may never reach your target price. Many market factors can interfere with its progress, and you may have set your target higher than you should have. Since there's no way all your trades will hit your price targets, it is a good idea to sell half your position at a more conservative target. Routinely taking profits will reward you in the long run.

There are a number of things that can interfere with a stock's movement and force you to close your position sooner than you'd anticipated. Your stock market lesson plans should cover all of these possibilities, but here are some reasons that should always prompt you to close a position:

1. The end of a trend. All trends end some time, and you should be prepared for this.

2. The stock's upward movement has slowed or been abruptly broken, ending its momentum.

3. The stock is approaching a major psychological barrier, perhaps reaching 100 dollars or 200 dollars a share, which should have been anticipated in your plan

4. The stock is about to reach a resistance level it has been unable to break through before.

This technical barrier should also have been anticipated in your plan.

5. A sudden market wide decline, or the threat of one, or some other serious uncertainty,

which leads to unsafe market conditions.

Exiting a losing trade is not a big deal. Ending a position whether or not the stock reaches its target price, in accordance with your stock market lesson plans, is good trading. The best traders would rather lose a small profit than take an unnecessary risk. You don't have to win on every trade; no one does, and it's dangerous to try. In fact, by limiting losses, a good trader can be profitable overall, and make money on only 40 percent of his trades. Cut your losses and start fresh with something else when you need to. You'll be happier, and you'll make much more money.
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About The Author
David Jenyns is recognized as the leading expert in designing profitable stock trading systems. His most recent course Trading Secrets Revealed is a step- by-step trading roadmap to having excellent money management. Learn how *you* can become one of his students. Click Here ==> http://www.trading-secrets-revealed.com