Stock Trading: Do & Don’t

Don’t
  1. Panic
    Panic situation happen when the market goes against you and you may lost your rational judgement.
  2. Make huge investment when the market dips.
    You may suffer a bigger lost by making a huge investment while the market in downtrend because even the price is at support level, the market may drop further. So make sure that most of indicators shows a buy signal before enter in the market.
  3. Chase performance
    Chasing performance is very risky. You may not aware of when the price will drop and this type of share price may drop within seconds.
  4. Follow tips
    The expert told us not to follow tips even given by your best friend because before they tell you they might bought it at lower price. When you decide to enter, the price may be already at higher price and can drop at anytime.
  5. Buy because big drop
    Never buy a stock that the price suddenly drop. Something may happen within the company and you don’t know about it.
  6. Hope your loser will be a winner soon
    You should hope your winner will be better and fear you will loss more.
  7. Emotional (greed or fear)
    Two biggest emotions in trading: greed and fear. Do not let greed and fear influence your trade. Set a target for your profit margin. Margin of 20% is very high and at this time you may start think of selling this stock.
  8. Buy because you have extra fund
    Never purchase a share more than your fund. All the costs incurred must be taking into consideration.
  9. Buy if not sure/doubt.
    If you’re not sure about the stock price movement, better stay at sideline and waiting for buying signal.
Do
  1. Sell the lousy one
    Do not fall in love with your stock. Sell it if the stock not perform well and start looking for others.
  2. Diversify your investment
    Buy different stock from different sector. Investment professionals all agree that the best strategy for reducing risk and increasing potential return is to diversify your investments. In other words, don’t put all your eggs in one basket.
  3. Strategy/Plan
    Before buy a stock answer why you enter, where is your stop lost point, set the profit level, know your risk and enough fund to purchase. The stop lost point is around 5% – 8% of the purchased price. If the stock goes up, your stop lost point should be based on the highest price. This can minimise your risk and maximise your profit.
  4. Stick to your strategy
  5. Keep a profit one and sell the loser
  6. Always read the daily news and company announcement
  7. Buy on bullish and sell on bearish
http://www.bursawave.com/category/stock-basics/page/4/

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