There are a number of strategies where investing or trading is concerned. There is the buy and hold strategy, breakout strategy, trend following and lots more. Generally, the more strategies that one come across, the greater temptation it is for a person to try it. The following article by Banjo Smyth discusses the basic investment strategies as the key to investment success. Have a read and form your own opinion.
Article Title: Basic Investment Strategies - the Key to Investment Success By Banjo Smyth
When you are investing on the Stock Market it can be a fine line between trading and gambling. If anybody knew exactly what the Stock Market was going to do they would make millions of dollars everyday but not even Warren Buffet knows EXACTLY which way the market will go every time.
So how can we decipher between Stock Market Gamblers and Traders? Or do you think there simply isn't any difference? I would like to look at one basic investment strategy that I believe is the main difference between Stock market traders and stock market gamblers.
Basic Investment Strategies - RULE No.1
'You must know when you are going to get OUT of a trade BEFORE you get INTO the trade, no matter what happens to the stock eg. It goes UP, DOWN or SIDEWAYS.'
I believe that this basic investment strategy is the main difference between Stock Market Gamblers and Traders.
Why is this rule so important? Investing is about having a great plan or basic investment strategy and sticking to it. The last thing you need is to let your emotions take control of your investing. As soon as you let your emotions get involved you are beginning to gamble with your money. It is vital that you create a set of rules that you will follow no matter what happens.
If you are confused by the idea of knowing when to get out before you get in then I will quickly explain what I mean by this. When you enter a trade you should be aware of every possible outcome eg. The share price will rise, fall, move sideways or a combination of all of these. You need to know exactly what you are going no matter which direction the stock ends up going. This is an incredibly basic Investment strategy but you would be surprised at how many people enter into the market with no idea of what they are trying to do. This is my definition of a Stock Market Gambler.
So my advice is to start creating some rules that will become the basis of your perfect investment strategy. Once you have created the rules you should plot out a plan that you can follow and then most importantly you need to stick to the plan. Best of luck and happy investing.
Parting words from Tompreneuer: I personally feel that you will need to set up your own basic rules and follow it. This may take a while as you fine-tune it till it makes sense to you. Read widely and test those rules that you've come across. It is not going to be an overnight kind of success as you will need to put in your fair share of work. For more trading and investment guidance tips, visit Quick and Easy Guide On Investment.
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