Anyone can invest in a stock.
But it’s takes a disciplined investor to invest well.
Like most investors, one of your top goals has been to enjoy financial freedom at whatever age you choose. So, it stands to reason that your money should ideally generate above-market returns with below market risk.
But it won’t happen unless you have discipline and a strategy.
That’s because -- if you really want to become a better investor then you need to plan ahead. You need to understand your money, your strategy, and your money management.
And, you need to be realistic.
Without any of that, you could be setting yourself up for failure, and the potential to lose.
Top 5 Rules to Become a Better Investor
One, you must know your exit strategy, and your money management strategy, including stop losses and trailing stop losses.
Two, never risk money you cannot afford to lose. Don’t do it. Don’t be that person, the fool that thinks Wall Street is a get rich quick slot machine that does nothing but spit of winnings. Investors have this obscene tendency to risk it all, hoping for a big payday.
If you can’t afford to lose $5,000 in a single trade, then why are you doing it? Trade half. Trade a quarter of it. But don’t risk it all. That may not sound like an exciting way to trade, but it’s been proven to protect traders.
The market is not a sure thing.
A friend of mine once saw a return of 200% in a week’s time on a trade. Then he risked it all on the very next trade that cost him 90% of that win. His wife was not happy.
Three, know when to just walk away from a trade with target prices, and stop losses. If a trade goes against you and hits your stop loss, get out. You can always buy back in another time.
Four, keep your expectations in check, be realistic.
You wouldn’t believe how many new investors think they can quit their day job and make a fast-paced, hot lifestyle out of just investing in small cap stocks all the time.
Five, remove all emotion from your trading. No matter what your emotion says, never allow emotion to dictate your action.
And six, always make sure you have a complete 360-degree view of what you’re buying before you buy it. Fundamentally, take a look at what’s under the hood of the company with regards to earnings ratios. Technically, understand what’s happening in the short- and long-term with support and resistance.
Failure to plan can lead to unnecessary loss. Plan ahead and you’re ahead of the game.