There are many important things you need to know to trade and invest successfully in
stock market or any other market. 12 of most important things that I can share with you based on many years of trading experience are enumerated below.1. Buy low-sell high. As simple as this concept appears to be, vast majority of investors do exact opposite. Your ability to consistently buy low and sell high, will determine success, or failure, of your investments. Your rate of return is determined 100% by when you enter stock market.
2. The stock market is always right and price is only reality in trading. If you want to make money in any market, you need to mirror what market is doing. If market is going down and you are long, market is right and you are wrong. If stock market is going up and you are short, market is right and you are wrong.
Other things being equal, longer you stay right with stock market, more money you will make. The longer you stay wrong with stock market, more money you will lose.
3. Every market or stock that goes up will go down and most markets or stocks that have gone down, will go up. The more extreme move up or down, more extreme movement in opposite direction once trend changes. This is also known as "the trend always changes rule."
4. If you are looking for "reasons" that stocks or markets make large directional moves, you will probably never know for certain. Since we are dealing with perception of markets-not necessarily reality, you are wasting your time looking for many reasons markets move.
A huge mistake most investors make is assuming that stock markets are rational or that they are capable of ascertaining why markets do anything. To make a profit trading, it is only necessary to know that markets are moving - not why they are moving. Stock market winners only care about direction and duration, while market losers are obsessed with whys.
5. Stock markets generally move in advance of news or supportive fundamentals - sometimes months in advance. If you wait to invest until it is totally clear to you why a stock or a market is moving, you have to assume that others have done same thing and you may be too late.
You need to get positioned before largest directional trend move takes place. The market reaction to good or bad news in a bull market will be positive more often than not. The market reaction to good or bad news in a bear market will be negative more often than not.
6. The trend is your friend. Since trend is basis of all profit, we need long term trends to make sizeable money. The key is to know when to get aboard a trend and stick with it for a long period of time to maximize profits. Contrary to short term perspective of most investors today, all big money is made by catching large market moves - not by day trading or short term stock investing.
