Trading is Timing

Hello buddies!!

After doing trading for some months, I came to know the secret of trading. Earlier whenever I used to bet on any stock or commodity, the very moment the stock used to go against my decision and as such I lost the bets many times. I wanted to know the reason as to why as soon as I bet on any stock, why do they go down? It was mysterious. I wanted to know what is the reason behind the underlying stocks which does well before betting, and all of a sudden depreciates after betting?

I was dire eager to know the reason. For that I started observing the stocks everyday. And here I came to know the reason for successful trade.

yaa buddies!! Timing is a vital ingredient to successful trading. For example, If today at 2’O clock the particular stock is appreciating, it is not necessary that the other day the same stock at the same time, it would be appreciating. It differs. But sometimes it works. I know Timing is hard to master. But the one who masters the timing in trading is for sure a successful trader for life long.

Feeling sad, for you are not a time-maestro. Don’t worry friends there are few tips for us out here because we cannot master timing.

The guys, who don’t find time to capture the timings of the trading, can still capture significant gains on an ill-timed trade if we follow a few simple rules.

1. The Advantage of Avoiding Margin

(a) Never Use High Leverage

Leverage: The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value.

(b) Never employ margin

Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".

Buying with borrowed money can be extremely risky because both gains and losses are amplified. That is, while the potential for greater profit exists, this comes at a hefty price - the potential for greater losses. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money.

2. Slow and Low is the Way to Go

There is a common cooking saying, “success in trading is based on the idea that 'slow and low is the way to go”. Namely, traders should enter into their positions slowly, with very small chunks of capital and use only the smallest leverage to initiate a trade.

3. No Stops? Big Problem!

Many traders don’t use stops in their trading and thus always look back to their trade as an awful one. But if we use stops while trading, and especially for bonds, we are sure winners at the end of the trade.

So why not learn more about what is a stop loss order?

It is an order placed with a broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%.

The advantage of a stop order is you don't have to monitor on a daily basis how a stock is performing. This is especially handy when you are on vacation or in a situation that prevents you from watching your stocks for an extended period of time.

There are no hard and fast rules for the level at which stops should be placed. This totally depends on your individual investing style:

Benefits from Stop Loss Order.

First of all, the beauty of the stop-loss order is that it costs nothing to implement

Secondly, but most importantly, a stop loss allows decision making to be free from any emotional influences.

Thirdly,Stop-loss orders can help you stay on track without clouding your judgment with emotion

Finally, A stop-loss order is such a simple little tool, yet so many investors fail to use it. Whether to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this trade. Think of a stop loss as an insurance policy.

So this is my coverage on what is all about trading. So why don't we all start observing the stocks in order to become a timing-maestro and successful traders.. After all, everybody loves money.. so why not invest our time in becoming good timers in trading.

Good luck everyone!!