Saturday, January 17, 2009

Tactics for Stocks Investment and Shares Trading. Common Sense Investing Tips for Successful Trading. Professional Guide to Investing.

Tactics you can use for Successful Stocks Investment.

? Tactic #1: Always, always sell all large-cap and high-P/E stocks before earnings are due to be reported!
Good news is rewarded only slightly, but disappointment drives immediate, steep price declines. So holding literally stacks the payoff odds against you. Institutional ownership raises the size of selling deluges, as does a long record of prior successes.
Today's minimal commissions make stepping aside before the event very cheap insurance. Besides, learning to place sell orders readily is good practice that will make this unfamiliar activity seem more natural over time. Internet databases list expected EPS-report dates; phone the company to check.

? Tactic #2: Be nimble, or the crowd will surely trample you!
Neither buying nor selling is a for-life decision; learn doing both as readily as ordering lunch when the situation requires. Instantaneous worldwide internet transmission of fact and opinion means the crowd takes virtually no time to move a stock's price. To avoid consensual victimhood, you must move rapidly. Investors/traders are paid well to anticipate change, but badly for reacting with the crowd after new facts arise. Companies change, so your opinion and position must. Today's price already reflects whatever you'll find in print or databases; you are not the first to see it!

? Tactic #3: Gracefully and promptly accept unreasonable profits!

Draw a line from your buy price and date to your target price and time. When fortuitous news, a major brokerage recommendation, favorable media coverage, or market euphoria shoots a stock notably above that line, sell! Not doing so means you're now accepting a lower future return rate from today to your target
Think opportunity cost of capital. You can always buy back. When the buying crowd swells well beyond normal that condition is unsustainable, so the stock must retreat. Understanding that, why hold on? Constantly ask if you'd buy today what you're presently holding, at today's price. (Holding is buying again!) What you'd not buy, you should sell.

? Tactic #4: Rid your decision process of ego's misguiding influences!
Overcome perfectionism: humans cannot always be right or routinely get the best price. Admitting mistakes early reduces money loss and ego pain. Resist temptations to ‘demand your money back’. Too many investors refuse to sell unless they get back every cent paid (for what has proved not a great choice). Meanwhile, many opportunities elude those ‘locked in’. Why demand getting back those last few percents in your proven laggard? Think opportunity cost, not blind loss aversion!
Forget three irrelevant facts: what you paid for the stock (the worst mental anchor), what it sold for at its all-time high (now proven a market mistake by subsequent evidence), and its high since your purchase (a strong but often wrong goal). Stocks over-run both up and down. A high was a temporary price error, not a deserved value.

? Tactic #5: Watch the wider world for clues that a trend reversal is due.
Not all relevant information about markets is found in the Financial Times, The Times or The Wall Street Journal. Watch humor and advertisements (whose success requires wide, understanding consensus) for signs of a bubbly, overconfident societal mindset. Cartoons, TV sitcoms, and print and electronic-media ads reflect well-established (late) trends. Do jokes feature easy riches (time to sell), or instead people leaping from bridges and windows (panic, a bottom)? When auto and holiday-trip ads refer to our market gains, time has come to hit the exits!

Good Luck for your trading success.



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