The 12 Rules of How to Avoid Losing and Start Making Money from the Stock Market

The 12 Rules of How to Avoid Losing and Start Making Money from the Stock Market

By Dr. Steven Lee (Ph.D)

RULE 1: WHY DO YOU INVEST?
Make more money, this is the answer to most people.
If your reason is to make more money, then ask yourself these three questions:

1.Is your strategy making money?
2.Is your strategy safe?
3.How to increase the profit and minimize the risk?

RULE 2: HOW TO CREATE WEALTH IN STOCK MARKET WITH JUST $1,000

Let say we invest some lower price stocks with just $1,000 in the stock market, invest twice a year for short-to-medium term. If each time the return is double, you will make one million dollar cash within 5 years. If your starting capital is $20,000, after 3 years you will make one million dollar cash.

If you are using the same $1,000 capital, invest twice a year, but the return is only 50%, you will make one million dollar cash after 9 years.

So we can always start small. However, it is very important that we know how to select high profit and low risk stocks.


RULE 3: DON'T GET OBSESSED WITH STOCKS
Sitting and monitoring the market whole day long will not bring you profit. Instead, it increases pressure and misleads your judgment.


RULE 4: NEVER GAMBLE
95% of the people always buy at the highest price. They don¡¯t really know when to buy, just relying on news, rumors and tips. Only 5% of the people knows how to trade at the lowest price. That¡¯s why 95% are losing money, only the 5% are making money.
Investment Builds Wealth, Gambling Definitely Lose !


RULE 5: SAY GOODBYE TO NEWS
News used to be able to predict the market trend. But not anymore, it is difficult to judge which news could actually influence the market nowadays.


RULE 6: DO YOUR OWN ANALYSIS, FORGET ABOUT TIPS
Before investing, ask yourself these four questions:

1.How many people have already heard about the tips before you?
If many have heard about it before you, this news is already obsolete. The price is already high.

2.How long have the tips been spreading before it reaches you?
The next day?

3.Who told you?
Listed company director? Or friends?

4.Assuming that the tip is true, would you possibly know about it?
Normally insider news is not disclosed.


RULE 7: SELL YOUR STOCKS EVEN LOSING MONEY
It is easier to be said than done.

Sell at a loss is a difficult decision. Your heart will object, and your feeling will say "It is going to rebound, don't sell." Eventually price dropped further, causing a much tragic lost.


RULE 8: DON'T JUST FOCUS ON MAKING MONEY

How to protect your capital is much more important. Don¡¯t try to make 100% profit. It is already good enough to have a 60% profit margin.


RULE 9: HISTORY WILL NOT ALWAYS REPEAT
Everyone expects to make some money from the stock market before Christmas, New Year, annual budget announcement or election, but the stock market is not always bullish during these events. We can say history is not always repeated.
The best way is ¡°Let the Market Lead us¡±.


RULE 10: QUOTES FROM WARREN BUFFET
There are only two rules to make money in stock market:

The first rule: Never lose your money.
The second rule: Never forget the first rule.


RULE 11: TURN BAD STOCKS INTO GOOD STOCKS, DON'T JUST HOLD YOUR STOCKS

Don't hold your stock too long, there is a value when stocks are sold.

How long have you been holding your stocks until now?
Since Year 1993? 1997? Or Year 2000?

Why didn't you exercise your stocks? Long term investment strategy is not practical anymore. Even the blue chips also crash when the market collapses.

The best strategy is to sell the stocks that are not earning money, and reselect some good counters. Buy low, sell high for several times will earn you more than enough to compensate the lost.


RULE 12: WAKE UP FROM MISTAKES

Stop investing if you are not sure of when to buy or sell.

Without the knowledge of investment, you are bound to lose again. This is an age of information. Investors are using knowledge, techniques and strategies to make money. Without investment knowledge, how do you protect your money?

Building wealth through investing starts with securing your capital.



Dr. Steven Lee (Ph.D)

An addition to the above rules :
BE DISCIPLINED!!!!!!

Hi,

Rule no 13 never ever belive reading this kinda post will save u from losses and will turn u r equity downside up

............

Anticipated! such a PJ,who else can will laugh at it than a poor traders like us!!

Hi, Members/Pioneers,

I'm introducing myself as a very beginer in to the capital market,Name Ganesh.
May be our interaction will be mutually benificial.Hoping and wishing everybody a good future.Take Care.

Ganesh
Hubli,karnataka

Quote:

Originally Posted by amarnath Hi, Rule no 13 never ever belive reading this kinda post will save u from losses and will turn u r equity downside up

If a senior memeber like Amarnath says so there must be some really BAD advise in the post and more so when Swagat86 seconds him.
It would be good for the members here if the same are pointed out more clearly.

Moreover Amarnath, rule no.13 was already there in the post without being numbered : BE DISCIPLINED!!!!

So kindly elaborate on your Rule which may be numbered 14 now....
Regards.
-R.K.Karnani
ps.: Though I am comparatively new to Stocks and my feelings, for what they are worth, is that the Rules posted are relevant and important.

HI Mr R.K.Karnani,

i have nothin to share. I dont have much experience abt trading compared to amarnath, but the fact is that these rules are written in so many places. Serach the forum ul get similar articles in a different package. Almost every book u pick and read on psychology have the same things. dont u think if out of 100 even 50 follow these.Atleast 40 must be succesful traders. Its pretty interesting that only abt 5 win rest loose. and if ur a scucesful trader i must say "Welcome to the Elite Club of Winners".


So think abt it. Also want to point out these rules are of importance no doubt but not only them. U need somethin more.





Thanks

I bet reading this will lead a real trader no were and most important aspect of trading is profit either u gamble or trade but at end point i need results i.e profit with or without discipline and no book can teach how to become disciplined and dont belive that some one will share for free a real trading system or strategy and i advice dont wait for such free lunch and to make easy profits.

secondly i dont care how i make profit either from scalping or from positional entry but i care how much i make wrt to risk bet on that entry or before my drag down will hit .

If its so simple then there is no easy profession in world other than trading which takes just a click to generate profit and remember its not just a push button technology

Try to learn right way of trading wrt to your trading psycology and risk tolerance than correct way of what most of past performance archives suggest i.e books


And no one i heared of have replicated a trading style and reproved similar success again, i mean one cant clone again same degree of success of what other have acheived on their own level of skill sets and style

An enriching discussion (it is not in books,real money ,actual drawdown,self tolerance threshold),this is what i learnt from this discussion.