2Bull Forex Blog

The 12 Rules of How to Avoid Losing and Start Making Money from the Stock Market

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RULE 1: WHY DO YOU INVEST?

Make more money, this is the answer to most people. If your reason is to make more money, then ask yourself these three questions:

1.Is your strategy making money? 2.Is your strategy safe? 3.How to increase the profit and minimize the risk?

RULE 2: HOW TO CREATE WEALTH IN STOCK MARKET WITH JUST $1,000

Let say we invest some lower price stocks with just $1,000 in the stock market, invest twice a year for short-to-medium term. If each time the return is double, you will make one million dollar cash within 5 years. If your starting capital is $20,000, after 3 years you will make one million dollar cash.

If you are using the same $1,000 capital, invest twice a year, but the return is only 50%, you will make one million dollar cash after 9 years.

So we can always start small. However, it is very important that we know how to select high profit and low risk stocks.

RULE 3: DON’T GET OBSESSED WITH STOCKS

Sitting and monitoring the market whole day long will not bring you profit. Instead, it increases pressure and misleads your judgment.

RULE 4: NEVER GAMBLE

95% of the people always buy at the highest price. They don’t really know when to buy, just relying on news, rumors and tips. Only 5% of the people knows how to trade at the lowest price. That’s why 95% are losing money, only the 5% are making money. Investment Builds Wealth, Gambling Definitely Lose !

RULE 5: SAY GOODBYE TO NEWS

News used to be able to predict the market trend. But not anymore, it is difficult to judge which news could actually influence the market nowadays.

RULE 6: DO YOUR OWN ANALYSIS, FORGET ABOUT TIPS

Before investing, ask yourself these four questions:

1.How many people have already heard about the tips before you? If many have heard about it before you, this news is already obsolete. The price is already high.

2.How long have the tips been spreading before it reaches you? The next day?

3.Who told you? Listed company director? Or friends?

4.Assuming that the tip is true, would you possibly know about it? Normally insider news is not disclosed.

RULE 7: SELL YOUR STOCKS EVEN LOSING MONEY

It is easier to be said than done.

Sell at a loss is a difficult decision. Your heart will object, and your feeling will say “It is going to rebound, don’t sell.” Eventually price dropped further, causing a much tragic lost.

RULE 8: DON’T JUST FOCUS ON MAKING MONEY

How to protect your capital is much more important. Don’t try to make 100% profit. It is already good enough to have a 60% profit margin.

RULE 9: HISTORY WILL NOT ALWAYS REPEAT

Everyone expects to make some money from the stock market before Christmas, New Year, annual budget announcement or election, but the stock market is not always bullish during these events. We can say history is not always repeated. The best way is “Let the Market Lead us”.

RULE 10: QUOTES FROM WARREN BUFFET

There are only two rules to make money in stock market:

The first rule: Never lose your money. The second rule: Never forget the first rule.

RULE 11: TURN BAD STOCKS INTO GOOD STOCKS, DON’T JUST HOLD YOUR STOCKS

Don’t hold your stock too long, there is a value when stocks are sold.

How long have you been holding your stocks until now? Since Year 1993? 1997? Or Year 2000?

Why didn’t you exercise your stocks? Long term investment strategy is not practical anymore. Even the blue chips also crash when the market collapses.

The best strategy is to sell the stocks that are not earning money, and reselect some good counters. Buy low, sell high for several times will earn you more than enough to compensate the lost.

RULE 12: WAKE UP FROM MISTAKES

Stop investing if you are not sure of when to buy or sell.

Without the knowledge of investment, you are bound to lose again. This is an age of information. Investors are using knowledge, techniques and strategies to make money. Without investment knowledge, how do you protect your money?

Building wealth through investing starts with securing your capital.

Once you have lived with a successful budget, you will never go back to living without one. You actually see what a budget can really do for your finances. The hardest part is getting over any emotional baggage that hinders your success. Then you simply have to find a budgeting method that works for you.

Budgets don’t seem like a pleasant thing at first. Yeah, they take some time to set up and figure out. And no one really wants to take a honest look at their finances. But do it now and in one year you will look back and see amazing changes. I have kept a record of how we have paid down our debt. I look back and see a time when we had credit cards maxed out. Now we have none. And we would have never gotten where we are today without a budget.

A budget helps you spend your money where you really want to spend it. Do you want to pay thousands of dollars a year in interest to a bank? A budget will help you eliminate that expense. What could you be spending the money on instead? I bet you can think of a few things.

Creating a budget isn’t about sitting down and saying what you can’t spend anymore. It really is more about seeing where you are spending your money. That is the most important part. Then you simply find where you can cut your expenses. Consider it a challenge. You have goals you want to reach — saving for retirement, vacations, new furniture and many other things. This is how you get there.

There are many people that like writing things out. But if you have little time, consider using a personal finance software program to help you budget and track your spending. I like writing out my goals and plans, but I just can’t beat the ability to track categories and spending that I find in my software. It makes balancing your checking, tracking your tax deductions and organizing your finances a breeze. It takes time to set up, but once you get the hang of it, it’s pretty nice.

Don’t go crazy. Listen, budgeting is about finding the money you need. You don’t have to start making your own clothes and making your own soap — unless you want to. Remember, time and savings are all relevant. Do what works for your family, not what someone else tells you is best.

One of the biggest drains of money is your cash spending (which I recommend over using your debit card). Keep receipts for all purchases. Most financial software programs have an area to track your cash spending. Simply enter your cash receipts like you would your checking or debit purchases. See where you cash is going. You may not realize how much some things are really costing you.

Budgets aren’t about sacrifice. They are about finding a way to get what you want without ruining your life. Sounds harsh, but debt can truly destroy your life. You don’t need that kind of stress. A budget can get you out of debt. It can save for your retirement. It can make you see your money in a totally different way. Take the time and find a budget that works for you. That’s the secret. It has to be your budget that looks at your spending and income — not someone else’s. It may take a few months, but once you have it, you’ll see the difference.