The MOST IMPORTANT
Part in Investing and Trading
Bad money management is one of the main reasons why people lose money in the stock market. Most people who learn investing or trading do not know how important it is. After reading this article, you will avoid the mistakes that most people make.
In fact, this article is so important that I recommend that you read it again and again and again. This will save you lots and lots of money in the future.
Bad money management results in huge losses, learn to avoid it
There are endless stories of how people lose thousands and at times millions in the stock market. If you examine why they lost that money, you will realize that...
THEY MANAGE THEIR MONEY BADLY
Trust me. In the heat of the battle, even the most experienced can be carried away by their emotions. That is when you can lose big money. I know this very well, because I have experienced it so many times in the past.
Good money management is the hallmark of great investors and traders
Most people new to the investing or trading are obsessed with the best ways to make money. They scour the internet, attend half a dozen courses and read countless books to find the best strategies. Sad to say, in their search for the holy grail, they usually miss the most important thing.
When you read the interviews with successful investors and legendary traders, you will realize that they put more emphasis on managing money well. Read through Jack Schwager's book, Market Wizards and you will see how important managing their money well is to those great traders.
There are many good ways to manage money well, here are some examples...
These are some of the rules that successful investors and traders have put into practice. We will go into more details in future articles.
1.Put only 5%-10% of your capital into one investment or trade.
2.Get out of the stock if you lose 7-8% of the money you put in.
3.Always have a plan and stick to your plan.
4.Always know in advance your entry, stop loss and profit points.
5.Never ever add money to a loser. You will lose even more.
6.Never ever invest or trade based on emotions.
Most people would never ever think of following the above. They are so obsessed with making money in stocks that they do not spend the time to learn the most important thing...Learning how to manage their money.
Now, I have opened your eyes to the greatest mistake people make. I hope you will remember this whenever you invest or trade. In fact, if you do not manage your money well, you are actually gambling.
Develop rules for yourself
As you begin your investing or trading, you should start developing your own rules. For example, you could make a rule to exit a stock if you lose 10% of the money you put in.
Then, make sure you stick to those rules.
Never underestimate the importance of managing your money well
I repeat again. You really must learn how to manage your money well. When it comes to your financial future, it pays to spend the extra time learning about this area.
We will go into more details on money management in future articles. Just remember, manage your money wisely and you will be ahead of most people who invest or trade in the stock market.
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