For all beginner that are doing trading and investing in the stock, forex or futures or options, there is one thing that you sure have to find out yourself: that is who you are and what type of trader or investor you are.Nobody can help you on that, you have to find out yourself.
Well first of all, if you invest or trade and find yourself waking up alot of time in the middle of the night thinking how the Dow is doing then you are taking too much risk.You cant concentrate on your work, you get easily agitated etc. This are clear sign you are taking too much risk.
However, if you find yourself able to sleep totally and the next morning you wake up and still do the same thing without even a thought about what happen mean you are either ignorant or too comfortable.For example, the stock has drop too much and you decide to tell yourself let just write off this. This is not healthy.
If you are serious enough, what you will be thinking of when you wake up is what to do? How doest the market match with the research that you made yesterday night?What to buy what to sell?How the market going to be like today?Does it coincide with the big picture?etc.Like i say many time, it is a thinking business.It is never easy money. Is just that alot of people assume it is easy money that why only 5% of the people make money and 95% lost money. And the 5% earn all the 95% people money.That how the game work.
The worst mistake and most common mistake that most people commit is that their investment horizon change when they invest.
For eg: Ah huat see Genting is moving up so fast.But he know that the market as a whole is going down, so he thght that he would give it a miss.Then he heard his friend, uncle, auntie earn money from Genting.
He observe the 2nd day hoping that Genting would come down alittle then he would buy. It dint, it went up higher.
So he decided that it been up so furiously for 2 days it wont go up anymore. He is firm that he would not buy.
On Third day, it went up very fast. He cant resist and he buy Genting at 1.68.He thought that he can make a killing within the intra day. Immediately the stock plunge. Down $0.16. He is panic.
But he is determine that the stock will go up.He change his investment period to the next day.Genting dint went up, the third day too. The fourth and the fifth day too dint went up.
His investment timeframe from intraday is prolong to 5 days.
Fortunately 11 days later, Genting is alive again.It went up to 1.78 today.Then now he face a dilemma to sell or not to sell. If it go up and i sell, how?Eventually he sold it. Making a handsome $0.10 profit.He thought that this way could let him make money.So he use the same way to buy other stocks.Guess what happen to him at the end.
If you make money and you dont know why, you have to be cautious.There is no free lunch and there is no free money.It can be just a beginner luck.Ah Huat uses hope and luck analysis and he is too emotion driven.He cant resist the temptation that people make money and he dint, and he think that this way is correct and he wish to repeat this way of making money again. Have a plan and have the intention to follow the plan while investing. If you say, is like that you cant control your emotion when investing, please try to do so. If not, you must as well donate money to the charity.And what make you so determine that the market will go up. Are you controlling??And once you buy a stock from the market you totally lost control. What you can do is watch, sell, or buy more and of course ignore.
Investing in any form of financial market is risky. It can lead to substantial financial loses. Have a risk capital ready for investing. Which mean to say those cash set aside for investing are cash that need not use to pay bills.They are excess cash. This should not even affect your saving.You must prepare to lose all the cash use for investing.
