Stock Market Rule #1: Pay Attention To Price
For those who invest in the stock market today, they typically will stick to a clear set of rules. That list of rule for the stock market begins with what the price of a certain stock is. The company may be poorly run but if market conditions signal potential for price improvement, an investor may choose to trade that stock for a quick gain. On the other hand, a strong company may climb higher in the stock market – maybe too high – at which point the stock price could start coming back down. In this case, the investor may want to become a short seller to take advantage of the benefits of the downside trend.
Stock Market Rule #2: Keep Cash On Hand
Anyone who’s interested in the stocks market needs to be able to trade and/or invest into the stock market. How do you do that? You need cash on hand. Staying liquid as they say, gives an investor the ability to buy a stock when the opportunity presents itself. If you are too heavily invested in stocks, bonds, mutual funds, or ETFs then you will be limited in your investment capabilities. Therefor it’s important to keep cash on hand so that you can execute more trades during the course of the day, week, or month, especially in today’s stock market.
Stock Market Rule #3: Make Sure You Practice & Hone Your Craft
One of the most important things you should do as a trader is make sure you practice and hone your craft. Just taking a basket of cash and going into the market is more of a risk than completely staying out of the stock market in general. There are a number of trading tools you can use that will help you become a better trader. This includes what is know as a paper trading account. This essentially gives you access to the markets and “play money” to practice trading. Though the winning trades won’t make you money, the losing trades won’t take away your hard earned cash.
Try out different stock market trading strategies. Day trading, swing trading, buy and hold, options trading, futures and even foreign exchange gives you exposure to a wide array of market opportunities.
Stock Market Rule #4: Keep Investing Simple (K.I.S.)
Whether you are new to the stock market or an experienced investor, the market isn’t complicated. Don’t try to overthink things and don’t try to chase every breakout. Keep investing simple. Think about this for a minute because I’m sure many of you have heard about or seen first hand the following scenario: A company has bad earnings or a failed FDA trial and not only does that stock drop but also several others within that sector. It’s something that doesn’t make sense but it is how the stock market works at times. At the same time, a company that doesn’t normally have any big developments could end up seeing an explosive run because a stock within that sector is on fire. The market lifts. It’s this market psychology that you need to be aware of but don’t overthink it.
When you only pay attention to the price of a stock, you really don’t require the markets to be logical. All you want to see is price to go in the direction that you think it will. When you buy a stock, you want the price to go up. Conversely, when you sell a stock short, you want the price to decrease.