Penny Stocks Lists

Seasoned traders and investors will all agree that there are some things you just shouldn’t do when investing in the markets.

And what’s more – the traders or investors who do these certain things end up becoming the statistic – more than 82% of traders close their accounts within 9 months, never to trade again. Long term investors have it slightly better, although 2008 certainly sent many running for the sidelines.

So here is a list of 10 killer reasons reasons why traders and investors fail. What does it mean for you? Well you can enjoy more success in the market simply by doing the opposite of everything on this list – and you will know what to look out for and avoid in the future. And then click on the link at the bottom for even more things to watch out for!

If you’re ready, then here we go!

1: They don’t create a plan. You wouldn’t start a business without a business plan, would you? Then why start trading without a trading plan? List your entry and exit rules, you money management, your goals. All of these things bring you greater success.

2: They can’t admit when they’re wrong. We are all wrong at times – but the best traders or investors don’t have trouble admitting it. They are able to sell out of a stock at a pre-determined point, regardless of how much they love the stock. Forget your ego, and start being ok with being wrong. (Please note… this reason may also be wrong).

3: They haven’t outlined solid back-tested rules for entering and exiting. If you were forced to jump off a cliff into the ocean, would you look where you were jumping? Of course you would! So don’t jump into the market without looking where you’re going – or creating rules and checking them regularly!

4: They mistake a rising market for investment skill. Ah bull markets. How many “gurus” come out of the woodwork as a market is rising? And what happens to most of them when a bear market comes? That’s right, never heard of again. Whatever the conditions, keep learning in the markets. Or as Han Solo from Star Wars puts it: “Don’t get cocky, kid”.

5: They over-analyze. More commonly known as analysis paralysis, this can happen when you do so much research and get so many conflicting views that you find you can’t actually make a trade. Keep it simple – all the best traders do.

6: They give up too quickly (and don’t let their expectancy work). Many methods will work over the longer term, given a positive expectancy. But some traders or investors get discouraged and give up, right when the market conditions are about to change in their favor.

7: They blame others when things go wrong. Ah blame. It’s so easy to do! After all, if it’s “their fault” you don’t have to change, and your ego goes unruffled. But the thing is when you blame others, you lose the lesson. And when you are trading or investing, you definitely cannot afford to lose a single lesson.

8: They use too much leverage. Leverage can be great, when used wisely. It can help you increase the amount of trades you have on, and take short positions, and it’s even tax deductible in many countries. But leverage is a double edged sword. Use too much of it and it can take you and your account down.

9: They pay too much in brokerage. Brokerage can have a devastating effect on a small account. If you are using a full service broker at around $60 one way, making 50 trades a year will cost you $5,000. This is a big drag on your account, especially when you are trying to use compounding to grow it faster. Larger accounts are not so bad, but it still pays to be aware of this pit fall.

10: They want to become millionaires overnight. Becoming a millionaire takes time – time for your compounding to grow your account, and time for your expectancy to show a consistent result. The truth is that people who want to be millionaires straight away usually go bust sooner.

For 31 MORE reasons why traders and investors fail visit Dave McLachlan’s free site at www.ASXmarketwatch.com. It could save you!

So you want to increase your wealth by investing in ASX Shares? Start out on the right foot and you could eventually supplement the income from your job. But make one of a few fatal mistakes and you could see yourself right out of the market, never to trade again.

What do I mean? Let me give you an example: Let’s say you started putting $150 a month into ASX Shares in 1980. That’s around $5 a day. It earns an average of 15% per annum over the years including dividends. If you re-invested all your returns, today it would be worth over one million dollars – $1,038,490 to be exact.

But many people when first starting out make a few fatal mistakes – maybe they lose a little (or a lot) of money. And they stop investing. They get scared out of the market. And because of this they lose out on all the rest of the gains over the years – they lose out on that million dollars we just discovered.

So here is the important part – what you need to know when trading ASX shares. It is often the most overlooked part of trading or investing: It’s your Trading Plan. In fact, don’t trade shares without one. But finding a trading plan can be a daunting task. Where do you start?

Well, if you take 100 different people, you will probably get 100 different trading plans. We are all individuals, and we all have different thresholds for risk. Therefore a good place to start with a trading plan is the following:

1: Your Entry and Exit Rules – these are the solid rules you have outlined allowing you to buy and sell your shares. It could be based on fundamental reasons, like a company’s earnings before interest and tax (EBIT), or it could be based on technical reasons, like a Dow Theory entry signal. Whatever you decide, you should follow them diligently.

2: Your Money Management Rules – this is where you decide how much of your portfolio you will invest in one share. And also how many positions you will spread your portfolio across. As a guide, between 6 and 12 positions is usually optimum. Any less than 6 and you risk not being diversified enough. Any more than 12 and you risk being unable to out-perform the market (the best portfolios are often slightly focused).

While some people can spend years determining the right trading plan – it doesn’t need to be complicated. With these rules you are well on your way to success in ASX shares.

Visit www.asxmarketwatch.com for more information on ASX Shares, including a free course and free market research on Australian Stocks.

If there is anything that strikes fear into the hearts of stock market investors, it is a major stock market crash.

Tales have been told of investors going bust, of the savings of an entire generation disappearing, and how it happened quickly and without warning. But is this true? Was there really no warning of an impending stock market crash? In this article I am going to show that there are warning signs, and how you can avoid future crashes.

You see, in both cases of a major stock market crash like 1987 or 1929 there are a few facts that we need to be aware of, so we can look out for them in the future:

Our first fact is that prices actually started falling long before the crash – in fact seven weeks before the crash. In 1987 and 1929, the time from the previous peak to the start of the crash was seven weeks.

Number two is the fact that between this seven week period, prices bounced. What does this mean? Prices fell from the peak, then rose for one to three weeks before falling again – this time through the previous trough in price. In both cases the very next week was the week of the stock market crash.

Take a look at this price action on a price chart, and it will look like a zig zag downwards. This zig zag was noticed by Charles Dow in the late 1800s, who coined the theory as his own, and as we now know it: “Dow Theory”.

So far this is simple enough, right? But will a stock market crash happen every time we get a zig zag down in price? The simple answer is no. If we had a crash every time, we would have had dozens of crashes in the last century alone.

However Dow Theory doesn’t just warn of crashes – it works for Bear Markets as well. In fact if you take a look at 2007 – a few months before the “experts” were talking about recession – you will see a quiet little Dow Theory zig zag down. So sometimes the move will be severe like 1987 or 1929, sometimes we may get a recession, and sometimes it may just turn around and go up again.

Overall, it gets it right around 70% of the time. Not bad considering most fund managers can’t even claim to be right 50% of the time.

So what does this mean for you? It’s simple. As an investor, if you see price fall, bounce, and then fall through the previous trough (most notably on a weekly price chart), then it might be a good time to lighten some of your positions and be ready. You can always get back in again if a crash doesn’t happen.

Get more ways to avoid a stock market crash and make more money in the stock market at Dave McLachlan’s site, www.ASXmarketwatch.com.