Posted by strudy on Nov 4th, 2008

Be a Winner or a Loser, it’s Your Choice!

The stock market is impartial as to whether you are a success or a failure in your share trading. The only person who cares (Apart from your bank manager) should be you.

For it is only by the choices and decisions that you make in the future which will determine your success or demise in the share market.

We will be dealing with realities today and actual truths. No pulling punches or soft soap, just harsh plain facts.

This article is about Choices or Decisions. Call them what you will, but they will determine your future trading habits, and the trading success you may or may not achieve.

For a start I won’t guarantee that after reading this article you will become a “Roaring Success” in your share trading forays into the stock market.

But IF you make the RIGHT Choices and put into practice some of the Choices below, you will become more aware of the pitfalls and traps that await the unwary and untrained trader. And therefore swing the probability of success factor in your favour and thereby minimise the risks also. Plus by learning by your mistakes you will increase your chances of success.

These Choices are in no particular order of importance. These I leave up to you to work out what suits you best for you are the one who will ultimately be making all of your trading decisions.

So the “Ball is in your court” It is now up to you.

1st Choice.

Do you want to be a Winner or a Loser? If the answer is a Winner read on. If not now then perhaps later on when the time is right. That’s if there is a next time.

So saying that let’s take a look at some of the Choices that are available that will assist you on that rocky road to becoming more successful in your trading.

2nd Choice.

The Winner always has a preset plan to work to. I won’t go into details as there are other articles available in this site which covers this in greater depth. This part is essential, for without a plan you are doomed to failure.

The Loser doesn’t bother or is uniformed or worse doesn’t care.

3rd Choice.

The Winner has bought his stock ONLY after he had completed his research and not before. This research was his OWN for he relies on his OWN Judgment and not someone elses.This has involved fundamental analysis as well as some technical analysis. Over time the Winner has learnt which methods suits him best and applies them accordingly.

He keeps a list of prospects (20 is a workable number.) which he updates on a regular basis. For he knows full well that on his list of potentials stocks rests his future profits.

The Loser listens to hot tips, gossip in chat rooms, Television, magazines and other media outlets. He relies on others for his research. Assuming of course they have done some. For he very rarely does any research himself. And as for any analysis well that’s just too hard, and he doesn’t need it anyway, and there’s no point to keeping a list is there?

4th Choice.

The Winner bought his stock at the best price possible, knowing full well that it was only luck if he happened to pick the very bottom and the lowest price just as the stock started to trend upwards.

If the share price rises above what he originally wanted to pay he will buy less stock, thus keeping to his budget. Or else he will wait for a downturn in the share price or failing that he will return to his list of other prospects. But still keeping an eye on this stock in case of a future downturn or a change in circumstances.

The Loser will chase the share price for he must have that “stock at any price” and therefore quite often ends up paying more than he originally intended. Then only to see the share price dip suddenly as profit takers move in. They can be left high and dry waiting for the stock to reach a higher price again. This can be months later particularly if the trader doesn’t want to take a loss. This of course ties up his funds for the duration he hangs onto this stock.

5th Choice.

The Winner knows that losses are guaranteed at times, and accepts this fact of life. But prepares himself for them in advance by using a “Stop Loss.” These are also known as conditional orders. The trader sees them as a form of insurance not only used to minimize losses but he also employs them to lock in his hard won profits as the share price rises.

He is fully aware of the other risks that abound when trading and takes steps accordingly. For he has learnt by bitter experience that if risks are not minimised that he can lose a goodly portion if not all of his trading capital.

The Loser again doesn’t bother, or is uniformed or worse doesn’t care. He sees it as an unnecessary expense. And as for risk he is unprepared for disaster. He is in reality an accident waiting to happen. He will eventually lose his money and quite often is not even aware of as to what has caused this to happen.

6th Choice.

The Winner has a preset profit in mind at the beginning of the trade and usually will sell when this level is reached. If the share price is going up faster than he anticipated or planned for, he will quite often sell part of his stock holding and then a rising stop loss to lock in further profits as they eventuate. This he reviews on a regular daily basis.

The Loser has no idea as to what his profit is likely to be, and will hang on for the highest profit possible, only quite often to see that the very next morning, that the profit takers have moved in and that any prior profit that might have been made is now a lot less than if they had got out earlier. Sometimes they miss out completely and experience a loss instead. This unfortunately is happening all to often.

7th Choice.

The Winner very rarely will put in an order overnight. He will patiently wait until the initial scramble for shares has occurred and the “dust has settled” which is usually around half an hour after the market has opened. Quite often the price is lower than the night before and he now has some idea of the mood of the market. He fully realizes that no one can predict which way the market will move during the day. But he is prepared for all eventualities.

The Loser of course could not wait and paid the opening price which sometimes can be higher than they bargained for, then only to see the share price recede during the oncoming days trading or they missed out altogether and will now chase the price. (Also See Choice 4.)

8th Choice.

The Winner has around a total of Five to Ten stocks invested in an average portfolio, and never exceeds his budget. He realizes the value of diversification and not having all your eggs in one basket. He knows that all of the sectors in the stock market are affected differently from time to time and that they are cyclic in behavior.

Just take property and the banking sectors for example and see how they have behaved of late.

The Loser invariably homes in on the current “Flavour of the Month” as this is the one stock that he is going to make a bundle on. And then win or lose, and when that stock’s shine wears off and is now not so popular, then it’s on to the next one. Forever looking for that get rich quick stock. The next potential gold mine..

Don’t get me wrong there are successful traders out there who have made money chasing stocks, but they are in the minority and very rarely are they consistently profitable.

9th Choice.

The Winner realises what role “The Emotions” particularly “Fear and Greed” play in the daily trading stock market scene, and utilises them to his trading advantage.

He knows that when panic reigns and there is a downturn in share prices that this is the opportune time to go bargain hunting.

He keeps an eye open for good quality stocks that have had a plunge in their share price knowing full well that they will recover in the not too distant future.

He always has extra funds available for events such as this.

The Loser’s trading behaviour is governed by his emotions and the actions and emotions of others in the stock market. He buys when they buy and sells when they sell. When there is a dip in the market for whatever reason the market panics and sells, he will copy them. Reason and logic play no part in his trading behaviour.

10th Choice.

The Winner believes in the value of paper trading. For this is where he can fine tune his trading skills and tries out new methods and ideas before putting his hard earned cash at risk.

He also regularly reads and is willing to learn new techniques, for he is only too aware that he does not know it all.

The Loser can not see point of this exercise and sees it as waste of good time and effort.

11th Choice.

The Winner knows when HE has made a mistake and teaches himself so as not to make the same mistake again and adjusts his trading skills accordingly. For he knows that he alone is to blame and that the fault is his and his alone.

The Loser blames the market, the stock, the information he received from his advisor or the finance magazine from where he got the hot tip. The last person he looks at is himself. So if no changes are made in his trading habits, then it is only a matter of time till that mistake or error in judgment occurs again and again to the detriment of his trading capital.

In a nutshell The Winner has planned to Win whilst the Loser by not planning is really planning to fail whether they are aware of it or not.

Is success guaranteed? The honest answer must be NO that it is not. Neither can you predict how a stock will behave in the stock market from one day to another.

Though there are people around who believe they can and will charge you handsomely for the privilege of letting you know also.

The purpose of The Choices above is help you to Minimise Risk and therefore to assist you to swing The Probabilities of Success in your favour.

For it is by using The Laws of Probabilities and Averages that you will maximise your chances of becoming more profitable in your future share trading.

So it is now up to you to make Your Choice as to where you go from here. It is in your hands and yours alone. No one else can do it for you.

I wish you every success in your future profitable trading
Strudy is a keen successful share trader on the Australian Stock Market Visit his weblogs for more free articles and useful information at both http://www.asxnewbie.com and http://www.aussiewealthreview.com