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Golden rules for trading in stock market

The Dangers !

The biggest mistake any investor do is not understanding the quantum of the high risk in stock market. Many investors relate a high risk to a high gain in the wrong way ! Thinking that to increase the amount of gain they need to take a higher risk. Actually, it is the opposite where taking a higher risk usually means increasing the probability of losing all of your money !

Equip above with low knowledge of trading and get drifted with ads of this is the way to became a millionaire, you just built the best losing machine !

To add more fuel toward driving nicely to lose, just add more noise to the non-knowledgeable investors as X stock will be doubling, Y is the best stock for this month, Crypto going toward 200K, Z will be the next Tesla, Tesla is now the future ! Investors will be driven instead of driving themselves. Tesla if historically incredibly increased that doesn’t mean it will replicate the same in the future again and be the best from now !

Founders of the best trading books indicate that without following strict rules that control your greediness and fear, you yourself will be the biggest enemy to yourself !

The Solutions

You need first to understand that stock market has a nice probability of gains and to ensure your best portion, you need to follow risk minimization rules and gain maximization rules.

Risk minimization rules

  • Don’t make your portfolio of one or few stocks whatever was the temptation to do so. Pick various excellent stocks instead of few. It is difficult to get the best stock among thousands of them. But easier to get various of good stocks. Remember the critical percentage rule, a stock can fall maximum by -100%, however there is no limit for going up, it can go 100,000%. One stock can cover the loss in all of your stocks if happened.
  • Don’t buy on the same period. There are period of peaks and period of Lows. Spread your investments to years.
  • Keep cash for the golden sale like 2020. Warren Buffet currently has 130 Billion in cash !!
  • Don’t gamble instead of investing. Statically gambling ended in losses more than gains. Your picks should be based on analysis or trusted site picks.
  • Remember the rules because you are the enemy of yourself and your emotions (greedy/fear) will try to control your brain not to follow the rules !

Gain maximization rules.

  • Equip yourself with knowledge, read books about the same like “The intelligent investor” or “One up on Wall Street” to control the noise around you from media and friends.
  • Analyze stocks or take the picks from trusted source. There are sites to recommend stocks and will show they gained more than indexes, but none show how they calculated the same. Some of them recommended stocks on peaks. So, don’t believe any site how famous it was, see the maximum transparency available.
  • Spread your capital between cash or equivalent and Shares. when economy is not stable or high be on high cash equivalent. When market is down and stabilized, take the golden opportunity. Critical rule, don’t pick the fallen sword, you will injure your hands. Stock market goes in waves, drop then stabilization will happen for months, then we can buy for next wave up.
  • Again & again, remember the rules because you are the enemy of yourself and your emotions (greedy/fear) will try to control your brain to follow the rules ! Buying a good stock, then dropping is ok, if it is driven by market without news. Your rules should be investing based on analysis, market will always swing like waves on ocean.

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