Avoid These Pitfalls that Lead to Loss of Income

The ability to make money when the stock market is down is the key to earning profits from investing. The market may slump at any time, and that is usually due to some circumstance that will change in a short period, and the market will rise again. To avoid the pitfalls that lead to loss, you must look at the current market trends carefully and make wise investments.

The most popular way to make money on the stock market is to buy during lower times and sell when the market is higher. This is the well-known “buy low; sell high” strategy, and it works just fine. As long as you have your timing correct.

“Price averaging” is another technique you should not neglect. If the market is dropping today and you own stock in a company that’s dropping, you could follow the herd mentality and sell it with the intention of sitting out the drop and buying at a lower price. OR… you could go against the herd… if you believe the stock will rise again to a point higher than when you bought it. If that’s the case, as the price drops, you can keep what you already have, but add to your holdings by buying more as the stock goes down.

Now, that may seem counterintuitive. “The stock is falling! Why should I buy a stock that’s falling”?

If you’ve paid close attention to what I’ve just said, you’ll realize that, if you end up buying some of those shares near the bottom of the drop, as those shares rise, they will wipe out the losses you’ve taken on the shares you purchased at a higher price... and, in the end, you’ll end up making much more money than you would have had you exited completely and then attempted to buy in low again, because you’ll be holding a much larger share of that stock.

Bingo!

When you invest, do not expect to get high profits instantly. Instead, you need to be patient and plan ahead. No one gains from investing just a little too much money. The key to success is to never forget to invest in your future. Do not just throw money at projects because you think that you will make a profit.

The market is unpredictable and it is important to understand what is happening at any given time. You must be able to spot opportunities and know how to capitalize on them. The market fluctuates based on many factors that are often overlooked.

You don’t gamble on the market by hoping that something will go up. Instead, you make educated investments in the knowledge that there are factors in play that will force the market to move up.

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There are many methods and strategies you can use to try to predict just how the markets will move. Some of them are really great! Others… not so much. Whatever your particular strategy is, you must be ready to change directions instantly… as conditions change.

The first thing to keep in mind is that investing money in markets that are very volatile does not work.

What? What did he say?

You heard me. Investing in volatile markets is a fools game. You want to invest in stable, predictable, boring markets.

You want to trade in volatile markets. In trading, volatility is your friend. You can spot a trend… get in … and get out, reaping your rewards without too much risk. But investing in a volatile market is just stupid.

You do need to know the difference. Are you investing? Or are you trading? Those are two different activities and require two different strategies.

Many people invest large amounts of money on the stock market, but they make very little money. Since you can’t control the stock market, it is important to invest in an area that you have a lot of confidence in. This way you can ensure that your investment does grow.

Trading, is another story altogether. One of the greatest pitfalls of investors is… they trade. And they act like traders.

The key is to know which of those you’re doing.

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