Investing Strategies - 4 Mistakes That Can Doom Your Investing Strategies
- Author Robert Rubin
- Published July 19, 2011
- Word count 575
Mistake 1 - Buy Long Only
Prices go up. Prices go down. Prices go sideways. Investing strategies that work only when prices go up will be losers.
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You'll win only about a third of the time.
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You need investing strategies for down markets and sideways markets too. Here are some you can easily learn to do:
In a down market -
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Sell short.
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Buy inverse ETFs.
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Buy put options and other option strategies for down markets.
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Buy "hedges" - what goes up when the rest goes down.
In a sideways market -
- Use non-directional option strategies.
All this may sound scary, but it's easy. All you need is a little coaching.
Mistake 2 - Fight the Trend
Stock prices can trend up or down. They can drift sideways. When there is a trend, go with it.
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Buy long in an up trend. Sell short in a down trend. Prices go up and down even when there's a trend. Prices always wiggle.
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An up trend means up moves are bigger than down moves.
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A down trend means down moves are bigger than up moves.
Many would-be scalpers fight the trend.
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They try to sell before the brief downs in an up trend.
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They try to buy before the brief ups in a down trend.
Don't do it! Here's why -
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Price moves against the trend are smaller than price moves with the trend.
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Down moves in an up trend are smaller. Up moves in a down trend are smaller.
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Fighting the trend means chasing smaller profits.
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Few people can time the brief moves inside a trend. Don't try.
Smart investing strategies follow the old saying "the trend is your friend."
Mistake 3 - Buy Without Knowing Why
Most people buy without knowing why. They get a hot tip from a pal. They see a TV report. They read a newspaper. But investing strategies take research.
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What will move the price?
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When will this happen? How long will it last?
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How big will the price move be?
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What could throw off your plan?
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What is your chance of success?
You raise your risk if you don't even think about these questions.
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Don't ask questions after you buy. Ask before.
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Take your time. A decision made in mere minutes is risky.
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Get good advice. You'd research a new TV or computer buy. Do as much for your investing strategies.
Mistake 4 - Give Back Your Profits
What should you do after you go into the black? Never let a paper profit turn into a loss.
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Protect your trading capital - the number one goal of investing strategies.
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Strategies that reduce risk are the long-term winners.
Trailing stops are the best way to exit with a profit.
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Place a trailing stop order right after you buy.
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Your broker sells if the price falls to a price you name.
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Your biggest possible loss should be no more than 3% of your total trading capital.
Trailing stops move up as the price rises.
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For example, if you buy at $50, with a 10% trailing stop you'd sell at $45 ($50 - 10%).
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If the price rises from $50 to $60, you'd now sell at $54 ($60 - 10%).
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Trailing stops never fall, even if the price falls.
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Once your stop rose to $54, it would not go lower. No matter what happens to the stock price.
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You'd keep at least $4 of your profit after the stock rose to $60.
Trailing stops get you out before all your profit vanishes. That keeps a profit from turning into a loss.
Now that you know about Investing Strategies, take action with Safe Money Products. Subscribe now to get 4 Free Reports and bi-monthly Action Alerts. Don't delay!
We find safe and profitable investment ideas. It's a joy for us to help you get rich! I hope you decide to join us.
Good - safe – investing.
Dr. Bob Rubin, Editor
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