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There are many crucial things you need to know to trade and invest successfully in the stock market or any other market. 12 of the most pivotal things are mentioned


1. Buy low-sell high. As straightforward as this concept appears to be, the vast majority of investors do the exact opposite. Your ability to consistently buy low and sell high, will more often than not determine the success, or failure, of your investments. Your rate of return is judged 100% by when you enter the stock market.

2. Remember that the stock market is always right and price is the only reality in trading. In case if you want to make money in any market, you need to mirror what the market is doing. On the other hand if the market is going down and you are long, the market is right and you are wrong. Moreover if the stock market is going up and you are short, the market is right and you are wrong.

Other things being equal in stature, the longer you stay right with the stock market, the more money you will make. On the other side of the coin the longer you stay wrong with the stock market, the more money you will lose.

3. In general every market or stock that goes up will go down and most markets or stocks that have gone down, will go up. The general thumb rule in this regard is the more extreme the move up or down, the more extreme the movement in the opposite direction once the trend changes. This is also termed as "the trend always changes rule."

4. In case if you are looking for "reasons" that stocks or markets make large directional moves, you will probably never know for certain. Since we are pretty much dealing with perception of markets-not necessarily reality, you are wasting your time looking for the many reasons markets move.

A huge blunder 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 mandatory to know that markets are moving - not why they are moving. In an ideal scenario stock market winners only care about direction and duration, while market losers are obsessed with the whys.

5. Stock markets normally move in advance of news or supportive fundamentals - sometimes months in advance. In case 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 the same thing and you may be too late.

You required to get positioned before the largest directional trend move takes place. Theoretically speaking the market reaction to good or bad news in a bull market will be positive more often than not. On the other hand the market reaction to good or bad news in a bear market will be negative more often than not.

6. More often than not the trend is your friend. Since the trend is the basis of all profit, you certainly need long term trends to make sizeable money. The pivotal thing is to know when to get aboard a trend and stock with it for a long period of time to maximize profits. Contrary to the short term perspective of most investors at the moment, all the big money is made by catching large market moves - not by day trading or short term stock investing.

7. It is of utmost importance that you must let your profits run and cut your losses quickly if you are to have any chance of being successful. It is worth mentioning in this regard that trading discipline is not a sufficient condition to make money in the markets, but it is a necessary condition. In case if you do not practice highly disciplined trading, you will not make money over the long term. This can be termed as a stock trading system in itself.

8. According to experts the Efficient Market Hypothesis is fallacious and is actually a derivative of the perfect competition model of capitalism. As a matter of fact the Efficient Market Hypothesis at root shares many of the same false premises as the perfect competition paradigm as described by a well known economist.

Furthermore the perfect competition model is not based on anything that exists on this earth. Consistently profitable professional traders simply have better facts and figures - and they act on it. Majority of non-professionals trade strictly on emotion, and lose much more money than they earn.

The combination of superior facts and figures for some investors and the usual panic as losses mount caused by buying high and selling low for others, creates inefficient markets.

9. In simple terms traditional technical and fundamental analysis alone may not enable you to consistently make money in the markets. Successful market timing is an absolute possibility but not with the tools of analysis that most people employ.

In case if you eliminate optimization, data mining, subjectivism, and other such statistical tricks and data manipulation, most trading ideas are losers.

10. It is quite important that you never trust the advice and/or ideas of trading software vendors, stock trading system sellers, market commentators, financial analysts, brokers, newsletter publishers, trading authors, etc., unless they trade their own money and have traded successfully for years.

Point to be noted here is that those that have traded successfully over very long periods of time are very few in number. Keep in perspective that Wall Street and other financial firms make money by selling you something - not instilling wisdom in you. Thats why you should make your own trading decisions based on a rational analysis of all the facts.

11. The bad thing an investor can do is take a large loss on their position or portfolio. Market timing can play a pivotal part in helping avert this much too common experience.

You can avoid making that blunder by avoiding buying things when they are high. It should be quite easier that you should only buy when stocks are low and only sell when stocks are high.

Since your starting point is quite critical in determining your total return, if you buy low, your long term investment results are irrefutably better than someone that bought high.

12. The most successful investing routines should take most individuals no more than four or five hours per week and, for the majority of us, only one or two hours per week with little to no stress involved.

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