Alex, I am a saavy investor because I finally learned my lesson after losing money at the beginning of my investing career. The key to making money in the stock market is not to be right 100% of the time. Don't know anybody with that kind of record. You don't even have to be right 50% of the time. You can successfully make money in the stock market being right only 30-40% of the time. The key is to LET YOUR PROFITS RUN, CUT YOUR LOSSES QUICKLY. Depending on the volatility of the stock I will sell if I have a loss of 10-15%. I NEVER, NEVER, LET A PROFIT TURN INTO A LOSS! I just raise my stop loss when the stock goes up. Preservation of capital is a must! If you invest $10,000 in a stock and it drops to $5,000 you have to find a stock that doubles to get your money back. Let's say you lose another 10%. Now you are at $4,500. Let's say you make 10% on your next trade. You only gained $450. Even though you made exactly the same return your still in the hole $50. This is why I have made money on GIFS. I rode my winners for healthy profits but cut my losses quickly. Right now I'm at 3 wins 2 losses on GIFS. I am confident that I could be at 2 wins 3 losses and still would have made money.
I will give you a real case example of this. I keep a list of every trade I have ever made, in the order I have made them. I write down the winners in black pen and the losers in red. After tallying it up I noticed that 13 out of my first 14 trades I sold higher, but I still had a loss. How could this be? I sold my winners sometimes only a fraction of a point higher but rode that one loser down 14 points in shock.(IBM) I did this a few more times before I learned my lesson. Also don't kid yourself into thinking that you haven't lost yet because you haven't sold. This is ridiculous. Finally, buy low, more often than not sell lower.
C.C. (BTW, why is everyone calling me Craig short? I'm, 6 foot 6.) |
