Print Article for : Top 10 Stock Market

Your Online Guide » Guide to Finance » How To Handle Finances

[T1108]Top 10 Stock Market

by Matthew Merriman, Mat

Recently, it is clear for everyone to see that huge losses have been inflicted upon the stock market. This has resulted in an increase in a number of people (novice traders) opening brokerage accounts, with the aim of taking advantage of stocks whilst they are low. However this could lead to these people making CRITICAL novice errors.

If you are a novice trader or just want to be aware of the 10 CRITICAL errors beginners make then read on...

1. Lack of stop loss awareness - this means that when they enter a trade, and further losses are inflicted to the stock, it is unlikely they will be able to cut these losses short. If you are a novice trader, find out what stop losses are and use them!

2. Its easy for beginner traders to accidentally execute trades incorrectly - because they are new to ordering a stock, it is easy to mistype information/numbers or click on the wrong box (yes I have shorted a trade when meaning to go long before!). Making a few practice trades first is highly recommended.

3. No strategies - as they are new to the stock market, they are unlikely to have developed, let alone tested, any successful strategies. If they are planning to buy multiple stocks frequently, this could end up in them losing a lot of money quickly.

4. Little knowledge about stock market psychology - meaning that they are unaware of the ridiculous/senseless/greedy/fearful actions that a losing trades can make traders do! Remember 'traders that lose cut their winnings short and let their losses run!' this is an easy psychological state to get into after having a few losing trades.

5. Little knowledge about stock liquidity - meaning that traders could buy a cheap share and not realise that liquidity is low, which could result in them suffering from sharp price movements and not being able to get rid of the stock when they want to!

6. Not knowing the difference between limit & market orders - in volatile times like the last few weeks, depending on how much capital is invested, a the difference between a limit and market order could mean you start the trade with a significant loss.

7. Many people who invest for the first time do not know when to exit a trade - and more importantly do not know ho much money they want to make from a trade. This could result in the investor getting impatient and exiting a trade at completely the wrong time.

8. New traders on the stock market often follow tips from their mates or tips from people who they think have stock market knowledge - this can so easily lead to disaster, do you own research or seek professional advice! How many times have you taken a tip on the horses and lost? (I know I've done it!)

9. Novice traders do not research a companies key financial information, they often just go on big company names they know - this means they do not know how much a company is forecasted to grow, how much debt its in etc. This stuff is worth knowing if you want to make a trade on which way the share price is going to go!

10. New traders will often sign up to any brokerage account - this means they will not have taken into account if a broker charges inactivity fees for not trading, not ideal if their plan is to buy and hold a small number of stock for months and months!

So there you go guys, take all these points into account when entering the stock market and I would definitely recommend going on a stock market course to develop some strategies.

NB. I don't want to put you off trading but I do want to put you off losing your hard earned money!

1. Set Your Goal

You always want to start off any potential investment by thinking about what you want out of it. Ultimately, you're going to be making money off of it?duh. But how much? How quickly? How will this particular investment play into the bigger picture of all your finances? Getting all of this figured out ahead of time will give you a clearer image of your investment down the road.

2. Time to Strategize

We all know there are literally thousands of investment tactics out there. So pick one. Take your time and study up to find the approach that works best according to your financial goals. You can tweak it accordingly as you go through the rest of these steps, but the better prepared you are the smoother the entire process will go.

3. Asses Possible Risks

It is absolutely essential that you highlight the risks your investment will bring up. The key is to look at them realistically, not optimistically. You have to be able to devise an effective and PRACTICAL management plan. This will not only minimize your losses but in turn guarantee you maximize your profits, even if the investment tanks.

Notice how this step comes before profit assessment? This is to make sure you don't get overwhelmed with excitement before you size up the gamble you're taking.

4. Think about Profit Potential

Basically, you have to get paid, but you need to be able to do it at the right time. Most inexperienced investors just go for the cash, but by the time they actually collect their profits have diminished. Know when and how to get out so that the process is smooth and efficient.

5. But Are There Alternatives?

Do a little more homework. Check to see if there are other investments that have fewer risks, a better profit potential, or if there are is another strategy that will make your life easier (or hopefully a little richer at the end of the day).

6. Scaling the Mountain

This one goes along with devising an initial strategy. Every investment you make will have its challenges to optimize rewards and minimize shortcomings. By anticipating them you can create a strategy that will do just that.

7. Design Your Plan B

Set specific boundaries as to when you should get out of an investment. Whether everything goes wrong and you need to bail out or you've hit it big and need to move on, having explicit limits prevents you from losing returns or just losing more money.

8. Making the Right Choice

Investing takes time, so for one last time look over your new project as a whole. Now you've got all the pieces to see if this investment is really worth your while. And it's ok if it isn't: you'll be better off starting from scratch than losing on a big gamble.

9. Go for the Gold

In choosing to pursue an investment, go after it. Give it everything you've got and you'll come up a winner. Clich?, I know, but even if worse comes to worst you won't be that big of a loser either. Wholeheartedly following through on your game plan will give you the best returns in the long run.

10 Debrief

In the end look back over your plan. If somehow you bombed and lost a lot of money, try to figure out what went wrong. You want to ensure that you don't make the same mistakes next time. Constantly tweak your approaches until you find that perfect strategy. Once you've done that you'll eliminate all that stress that comes with the job.

Article Source : Pg. 284

About Author

Both Matthew Merriman & Joe Harris are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Matthew Merriman has sinced written about articles on various topics from Finances. Matthew Merriman, has experienced winning and losing in the stock market and now makes a decent living out of it. His website covers al. Matthew Merriman's top article generates over 2900 views. to your Favourites.

Joe Harris has sinced written about articles on various topics from Finances, Entertainment Guide and Stock. Joe Harris provides all the proven stock market investing tools you need to succeed today, including investments in the gold market. For details visit his site: