| 1. |
Don't trust professional analysts. |
If anything analysts can be used as contra-indicators. Unfortunately
it is not always easy to judge the true motivations of Wall Street analysts,
and almost every major brokerage is under investigation for misleading investors.
Also most analysts work for firms that rely on commissions as main sources of
revenue and so have a vested interest in getting their customers to make trades. |
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Always use planned stops. It has been said many times that success in the stock market is not about
picking big winners .. it's about avoiding big losers. At SageTrade we always use stops. In fact its impossible
for one of our analyst's to publish a play without entering a stop price. Our game plan includes being wrong up to 50%
of the time, but we get out quickly when we are wrong!
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| 3. |
Keep your emotions out of the game. |
Fear and Greed drive the stock market. You must learn to control both of these emotions
in order to be a successful independent investor.
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| 4. |
Invest your time before you invest your money. |
Do your homework. Learn everything you can about trading and what makes stocks and markets move.
Learn all the terminology. Learn about major indicators and oscillators.
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Use a strong fundamental and technical strategy. Analyze the risk and reward potential for
each and every investment you make. Play for the long term ... not the quick gain.
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| 6. |
Ignore hot stock tips. |
Bulletin boards, paid touts, your friends are all terrible places to get investment advice.
Common knowledge can be incredibly wrong. Do your own homework and don't expect hot tips to pan out.
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No one ever went broke taking a profit. A "paper" profit often lulls investors into a false sense of security.
Don't be afraid to book your profits and keep your capital compounding.
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| 8. |
Don't chase a stock (Up or Down) |
No stock goes up or down in a straight line. Picking your entry points well is half the battle.
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Any given equity can break down or rise quickly. Earnings warnings, takeovers, SEC investigations
can all play havoc with a stock prices. Diversifying your portfolio protects you against
such unexpected events and can help protect your capital.
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| 10. |
Watch out for fees and commissions |
Death by a thousand paper cuts is still death! Wall Street makes a lot of money from commissions.
Analyze all your trades NET of commisions and fees. We also recommend setting up an account with a low cost internet based broker.
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| 11. |
Keep detailed trading records |
Learning to trade is a constant effort of self analysis. And how can you analyze your performance if you
don't have a complete record of each trade? Track your entry and exit prices as well as the commision and the
appropriate dates and times. If possible try to provide reasoning of why you entered each position. After exiting a
position do some post analysis of what went right or wrong!
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| 12. |
Buy on extreme weakness and sell on extreme strength |
Of course recognizing extreme weakness and extreme strength is the real trick behind this rule! Markets often
go to extremes and these extremes are often great times to make money!
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