3 Fundamental Principles of Stock Trading

stock trading

When it comes to the stock market, it’s hard to find steadfast rules that don’t have any exceptions. That’s one of the great things about the stock market; you can put your own twists and turns on the trading strategies that you follow, and you can make brash money moves based on your personal risk tolerance. If you abide by the law, you can do whatever you want with your money.

It may be true that there are exceptions to every rule in the stock market, but there are three steadfast fundamental principles that every single stock trader needs to be familiar with.

1. Let Go Of Poor Performers

Investors commonly take their profits from successful stocks and reinvest them into the market, and when they do this, they hold the stocks that have lost value in hopes that they’ll rebound. It’s important to let go of hopeless stocks; if you get stubborn about it, you might find yourself holding losers until they are practically worthless. Keeping successful investments while getting rid of poor performing ones sounds easy, but lots of people get stubborn, and it ends up costing them a lot of money.

2. Don’t Invest Based On Hot Tips

Generally speaking, you don’t want to invest large sums of money based on tips. When you make an investment, it’s important to know why you are doing it. This is why we recommend doing your own research and analysis before investing your hard-earned money.

If you’re not sure how to do this, there are tons of online classes that teach you how to spot value in the market. Use online trading academy reviews to find a reputable and affordable class; there are tons of resources on the Internet, and when you read online reviews, you’ll be able to quickly figure out which ones are legitimate.

3. Don’t Sweat Short-Term Movements

It’s tempting to check on your investments a couple of times per day; some people even find themselves checking on their stocks every couple of minutes. It’s exciting to do, but if you get too wrapped up in watching your account balance, you forget about the big picture.

Doing this makes you anxious, and watching swings tends to make people lose confidence in their investments. If you’ve done your research, you should believe in the stocks you invested in, so there’s no reason for you to check their price every couple of minutes. Stocks are volatile in the short-term, but smart investors are in it for the long-term, so they don’t sweat every single price change.

Image Credit: OTA Photos 

Damian Davila

Ideas and concepts from Damian Davila, Ecuatoriano thriving in Hawaii. Pro marketer and blogger. Find him at @idaconcpts on Twitter.