There are many things that you need to know before you begin trading in the stock market. Here are 12 basic stock investing rules that you may follow for successful trading.
1. Buy low and sell high. This is the most basic rule of trading in the stock market. Just keep buying low and selling high and you will always be making profits.
2. Remember that the market is always is right. You can do whatever you want, but in the end, you have to play along with the market or you are in trouble. Of course, the days you are right, you are making money, so always try to stay right with what the market says is right.
3. Stocks are always moving up or down and they often reach extremes before reversing trend. This is what is known as "the trend changes the rule".
4. Do not look for reasons as to why stocks move the way they do. No one has figured it out simply because there is no way to do it. A common mistake is in assuming that the stock market has some rules that define how it works. The truth is that there are no rules or parameters that the market follows. It simply is and trying to fathom why it is that way is a futile exercise.
5. Do not rely on news or other "up to the minute" publications while making your decisions because the market moves too fast for any of them to keep up. Do not rush in to invest and also, do not wait too long to do so. In either case, you might end up with an underserved loss.
6. Underlying the apparent lack of order or direction of the stock market are broad and secular trends. Follow the trends and you are playing it safe. The important thing is to know when to stop following some trend. Trends are long-term movements that lead to serious money. Day-to-day small trading will not lead to wealth.
7. Cutting losses while letting profits run lose is important to success. Discipline in trading is very important and only discipline can tell you when to exit a trade. Undisciplined trading will inevitably lead to ruin.
8. The Efficient Market Hypothesis is about as intelligent as the Perfect Competition paradigm. There is no such thing.
9. Analysis in itself is not going to lead you to profits. You also need to master the art of proper timing for your trades. Data mining, optimization, subjectivism and similar statistical tools are imperative for achieving success.
10. Do not follow the herd and always think for yourself. Following trends is not the same as doing what 20 other traders are doing. That is herd mentality.
11. The worst thing to avoid is having a huge loss on your portfolio. Remember the first rule and apply it diligently to all your trades. Buy low and you are that much safer.
12. Do not trade more than 4-5 per week if you are starting or more than 2 hours per week if you are a veteran. If you are doing more than that, you need a new trading plan.
Alan King is a writer that concentrates on helping people better themselves, for cutting edge information you NEED to know about stock trading before you try to cash in on this multi TRILLION dollar industry I strongly suggest that you check out my friend Mark Crisp's awesome free 9 page ebook at http://www.stressfreetrading.com