Swing Trading For Dummies Ebook

Stock Trading For Dummies: The Rules You Need To Know About

To reach an acceptable level of performance, it is necessary to accept a certain level of risk and therefore invest a more or less significant part of your savings in the stock markets. This is obviously an investment that needs to be carefully thought about and requires the respect of certain basic rules:

Rule 1

You must invest a part of your savings that you’re not likely to need in the short or medium term. Indeed, your porfolio must be able to handle the market swings and you should be able to accept a decrease in the value of your portfolio short-term without worrying about liquidating it to pay your bills…

Rule 2

Do not concentrate all your investments in one to two shares. Diversification is one of the most important rules to follow when investing in the stock markets: savings must be spread over several stocks, several industries or/and several geographical areas. The stock markets are very risky in the medium or long term only for investors who do not respect the basic principle of diversification.

Rule 3

Avoid, however, having investments too widely spread out. You should have at least $5,000 invested in each stock of your portfolio. If each and every line of your portfolio is worth less than that amount, part of its performance will be taken away by transaction costs and management fees. If the initial amount of your investment does not allow such a sum to be invested, you should think about investing in mutual funds instead of shares: your savings will be diversified and not spread out too much.

Rule 4

You have to wait until the right time to buy. No need to rush just because you decided you wanted to invest part of your savings in stocks. Wait for a market bottom and keep your savings away from the stock markets in the meantime. Obviously, it is very unlikely that you find the bottom on your first try so what you should do is invest your savings bit by bit in successive and regular waves.

Rule 5

Do not panic at the slightest turbulence. Remember at all times that on the stock markets you haven’t lost anything until you’ve sold your shares. Markets don’t go down forever, if you buy bit by bit as they go down, you’ll lower your average prices and get in a perfect position for when they turn around, and eventually they will: shares are a long-term investment.

Rule 6

On the other hand, you should also be able to sell at the right time. Do not wait forever. Set realistic profit limits to achieve and sell when they are reached.

Rule 7

Try not to do too many intraday trades, medium to longer term objectives are a lot safer for most investors. In & outs on a daily basis should be left aside for experienced traders who have access to powerful real-time tools and a wide range of market research providers. If you get into hardcore intraday trading without the proper knowledge and tools, you can lose a lot of money in no time.

Rule 8

Finally, keep a flow of liquidity so that you have enough to meet unanticipated needs and more importantly take advantage of buying opportunities.

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About the Author

John Dolyder

Internet Marketer and Part-Time Trader

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