Understanding Stocks

by Michael Sincere

Mistake 4: Not Having a Plan for Buying and Selling

Mistake 5: You Are Not Disciplined and Flexible

Mistake 6: Trading on Tips

Mistake 7: Trading During the First 15 Minutes of the Trading Day

Mistake 8: Holding Losers and Selling Winners

Mistake 9: Not Using Market Indicators

Mistake 10: Not Keeping Track of Mistakes

Mistake 11: Not Planning for the Worst

One of the reasons I survived even after making many mistakes is that I use a number of strategies that protect my portfolio, especially if I see evidence that the current trend will end. When I am certain (based on indicators), I sell when the uptrend is struggling, or I buy when the downtrend has reversed.

Mistake 12: Believing the Market Is Logical

As British economist John Maynard Keynes once said, “Markets can remain irrational longer than you can remain solvent.”

Bottom line: The only reality is what the market does, and everything else is just noise.

Mistake 13: You Don’t Know How to Lose Money

Where to Get Help

The Secrets of Economic Indicators 3rd Edition (FT Press, 2012) by Bernard Baumohl. This is an extremely readable book on understanding and interpreting economic indicators. After reading this book, you will know a lot more about economics than you thought possible.

Use Both Technical and Fundamental Analysis

Instead of buy and hold, buy and protect.

1. Begin by paying off all your debts. 2. After being debt-free, you must not be tempted to blow your money on risky financial ventures. 3. It is hard enough for most people to earn a bare living, including 95 percent who are unable to keep and acquire a fortune. This is not to discourage you but to warn you and give you courage to fight harder to be one of the 5 percent. 4. Always be prepared for the possibility that you may have to support your parents. In addition, you owe it to your wife and family to buy life insurance. 5. You want the privilege of helping those who are afflicted and impoverished. 6. The most important measure of success is integrity, hard work, and being right more than 55 percent of the time. This also means diversifying risks so that when you are wrong, it won’t break or crimp you. 7. Never cosign promissory notes to help others. 8. Never buy stocks in small corporations to please friends—easy to buy, hard to sell. 9. Don’t be easy in loaning money except in extreme cases (i.e., don’t let a worthy friend down). 10. Only hard experience, proven by facts, should impress you and cause you to follow the rules just outlined.