Investing Strategies - 4 Mistakes That Can Doom Your Investing Strategies

FinanceTrading / Investing

  • 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.

  • You'll win only about a third of the time.

  • You need investing strategies for down markets and sideways markets too. Here are some you can easily learn to do:

In a down market -

  • Sell short.

  • Buy inverse ETFs.

  • Buy put options and other option strategies for down markets.

  • 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.

  • 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.

  • An up trend means up moves are bigger than down moves.

  • A down trend means down moves are bigger than up moves.

Many would-be scalpers fight the trend.

  • They try to sell before the brief downs in an up trend.

  • They try to buy before the brief ups in a down trend.

Don't do it! Here's why -

  • Price moves against the trend are smaller than price moves with the trend.

  • Down moves in an up trend are smaller. Up moves in a down trend are smaller.

  • Fighting the trend means chasing smaller profits.

  • 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.

  • What will move the price?

  • When will this happen? How long will it last?

  • How big will the price move be?

  • What could throw off your plan?

  • What is your chance of success?

You raise your risk if you don't even think about these questions.

  • Don't ask questions after you buy. Ask before.

  • Take your time. A decision made in mere minutes is risky.

  • 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.

  • Protect your trading capital - the number one goal of investing strategies.

  • Strategies that reduce risk are the long-term winners.

Trailing stops are the best way to exit with a profit.

  • Place a trailing stop order right after you buy.

  • Your broker sells if the price falls to a price you name.

  • Your biggest possible loss should be no more than 3% of your total trading capital.

Trailing stops move up as the price rises.

  • For example, if you buy at $50, with a 10% trailing stop you'd sell at $45 ($50 - 10%).

  • If the price rises from $50 to $60, you'd now sell at $54 ($60 - 10%).

  • Trailing stops never fall, even if the price falls.

  • Once your stop rose to $54, it would not go lower. No matter what happens to the stock price.

  • 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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