Stock Market For Beginners ImageWhether you’re investing your retirement money or your discretionary money in the stock market, you obviously want to make that money grow.  So, after over a decade of experience, here’s a tip that will make the stock market for beginners a lot less stressful in terms of losing all that money.  THIS WOULD HAVE SAVED ME OVER $10,000 so please heed this tip and save yourself psychological damage and lots and lots of money (and time).

A Little Something An Ex-Hedge Fund Manager Taught Me

I’ve been subscribing to an ex-hedge fund manager who has well over a decade of experience in the markets.  To his credit, he has lived through watching $15,000 turn into $50,000, back down to $7,000, then up to over a $100,000.  That’s some serious experience if you asked me.  He has also called the last (vicious) bear market beginning in 2008, so I respect his stock trading skills.

However, he has researched stocks that looked technically and fundamentally PERFECT, but, to his surprise the stock actually went against him.  The fact is, NO ONE knows what kind of events will take place that will affect the price of a stock!  VERY IMPORTANT LESSON: Even Pros pick the wrong stocks. This leads me to my tip.

A Simple Tip That Will Save Your Life

EVERY SINGLE TIME you enter a trade, place a stop-loss order at a point you feel the stock shouldn’t dip below (or above if you’re going short).  You do not want to get trapped with a big loss because the bigger it is, the harder it will be to sell.  Like William O’neil says, think of the small loss as insurance to avoid a financial catastrophe.

There are different methods of determining where your stop-loss should be placed and it’s important you find one that you are comfortable with.  Some traders use a multiple of the ATR (Average True Rang) or the level of the latest support, but what ever you decide, enter a stop-loss ASAP.

If you’re a TDAmeritrade client, use what they call conditional orders.  It’s basically when one order is executed, it triggers a second order or a series of orders.  So, for example, you can set up a conditional order called OTA (One Triggers Another) where you place a buy order to buy 100 shares of stock XYZ at $10.00.  At the same time you you place a sell order to sell 100 shares of XYZ at $9.25.  Now, when your buy order is executed, your sell order will be triggered and automatically be sent to your broker .

Learn The Easy Way

The stock market for beginners can be costly.  Surviving the markets should be your number one concern because I’m guessing you’re planning on using that money (in your account) some time.  You don’t want find yourself in a 3 year bear market with no money to invest (to lower your cost basis if your dollar cost averaging).  And worse yet, a market that goes sideways for 15 years.  You may have that kind of patience but I’ll bet you’ll need the money right when your once $500,000 account drops to $200,000.

Learn the easy way (from other people’s mistakes) and protect yourself from catastrophic losses and use a stop-loss order at all times.

Photo courtesy of YoTuT

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