5 Nuggets of Trading and Investing Wisdom


It takes proper knowledge and a certain mindset to become elite at anything. Trading and investing are great examples of this reality. The following nuggets of wisdom can help your trading and investing in a positive way.

Money Management is Crucial
Trading to win in the stock market, futures market, or any other venue requires certain principles to be followed. Most important, you need to keep all losses small. Get out quickly when the market starts to go against you.

Every trade you make should have a fixed stop. This stop will take you out automatically at a pre-determined price. You will save not only trading capital but psychological capital as well. You can use a trailing stop to protect profits when the market goes your way.

Patience is Truly a Virtue
Waiting for just the right opportunity to materialize based on your trading plan is imperative. Sometimes I will plan out a specific trade well in advance. I only take a position in the market when everything lines up just right.

For example, I will only trade a growth stock when the following conditions are met. The stock must be fundamentally and technically sound. It must break through a critical resistance area on heavy volume. This method is an excellent example of trading to win.

Concentrate on the Process
Many traders and investors give way too much thought to how much money they plan to make. This thinking is a mistake. You want to concern yourself with doing the right thing rather than making money.

If you focus on the process, the profit will happen independently. This focus is an important lesson to learn. It is a big part of trading to win. Concentrate on the process, not the results.

Going Against Human Nature
Wow, does this go against conventional wisdom! The most outstanding performing stocks proved that buying low and selling high was wrong. Amazingly enough, stocks that seem too high in price and risky to most traders usually go higher.

On the other hand, low and cheap stocks generally go lower. Once you implement this type of thinking, you will be trading to win.

You want to look for stocks making new price highs as they break out of price consolidation areas or bases. This breakout is the point where most of the significant price advances begin. It is also when the odds of a considerable price advancement are the greatest.

You always want as many factors in your favor as possible before taking a position in the market.

Trading to Win
It takes time to become a highly-skilled market participant. It will take a few years of proper trading education.

You will need to put in the same time and effort it takes to become an engineer or an airline pilot. There is one big difference, though. If you become an elite trader, the amount of money you can make is unlimited.

Becoming a skilled analyst means you can detect technical factors. These factors include trend direction, trend reversals, accumulation or distribution, resistance or support levels, and other characteristic signals.You should also be able to analyze fundamentals.

To have great success, you must understand and implement proper trading psychology. This mindset is what separates the average trader from a world-class one. When you put it all together, you will be trading to win.

It is important to note that these nuggets of wisdom are geared toward growth stocks during an uptrend in the general market. Value investing can also work well if you follow a great value trader’s methods, techniques, and rules, such as Warren Buffett.