Five Things To Do To Be Rich

Ever wonder why there can only be one “Genius-Investor” Warren Buffett, one“Microsoft” Bill Gates, one “Currency-Speculator” George Soros, one“Superman” Li Ka-shing or even one “Super-Blogger” Darren Rowse in this globe? Because all of them posses their own unique style in conducting stocks-investing, technology-empire-building, risk-profit in speculating, property-empire-building and blogging.

That’s the main reason why you can’t have another copy of the same success these peoples have. The closest you can get is being able to make some money or fortune learning their techniques or business-model but you are still subject to your own in-built characteristic.

You can read all the investing books from Amazon.com Inc (Nasdaq: AMZN, stock), attend all the seminars you can afford and ask a million investing questions because Warren Buffett is your neighbor next-door but you can never duplicate and apply all the teaching in your way of investing. So let’s start with the top 5 things you should do to make money investing stocks or trading option (in no particular order):

First Thing to Do

You Should Study the Companies’ Fundamentals – I wish I can tell you the number of times a company’s fundamental had saved me from un-anticipated stocks’ direction after I opened my trading position. As I normally put top priority on fundamentals to gauge whether to long or short a position, I study their sales growth, income growth, past earnings, net-profit margin, price-earning ratio, debt-equity ratio, institutional ownership and other data. It’s a proven Warren’s theory that the price of a stock will ultimately reflects its’ real value.

Having said so doesn’t mean my studies will always make me money else I would be one of the richest persons alive. If Warren Buffett made some losses along his investment journey, it’s only logical for you to make losses due to unforeseen reasons. As long as your net figure is positive, you’re on the right track.

Second Thing to Do

You Should Do Technical Analysis – unless you’re a clone-copy of Warren Buffett, chances are you will take ages to make huge money investing based on purely fundamentals. Technical analysis is the second key to make a decision to open a position (stocks investing or option trading) after you’ve opened the door with the first key(fundamental). Simply put it this way – if technical analysis is a hype it won’t survive till today, don’t you think so. Learning the basic technical indicators such as MACD, RSI (Relative Strength Index), Stochastic or even with just Support and Resistance could make you money multiple times.

Third Thing to Do

You Should Read the Pulse of the Market – this is perhaps the most general but always the neglected factor which most investors ignore. In times of uncertainty, for example the Federal Reserve’s meeting, you don’t expect market-makers or professional investors jumping into the stocks market do you? During global crisis where there’s a possibility of a war in Middle East, you don’t expect the market to be bullish do you?

On the contrary, you might be able to make money during uncertainties or crisis as the market emotion is full of fears. Would you long or short energy stocks during oil-crisis? And when the upcoming giant China sneezes, you don’t want to walk into the stocks market do you? It’s always wise to ride on the wave though there are times when you can maximize profit by being contrarian.

Fourth Thing to Do

You Should Know When to Lock Your Profit – so far there’s no report of investors losing money because they take profit off the table. Throw anyone into stock market and he or she will knows how to “buy”. Every level is a buying opportunity (subject to technical analysis discussed earlier), the problem with most investors (this include novice speculators and traders) are they do not know how to “sell” which translate to holding the stock forever infinitely in a yo-yo cycle.

If you do not take action to sell and realize the profit, you are as good as throwing your money into ocean. An extra day is an extra risk. Remember the saying “Bull and Bear makes money, Pig get slaughtered”

Fifth Thing to Do

You Should Minimize Your Emotion – how many times have you screamed at yourself for selling too early (you’ve entered the fear zone, mind you)? How many times were you cursing yourself again for “not” selling when you’ve met your target profit-level only to see the stock price reversed but you decide to hold on as you “believe” it will goes back to pre
vious level (you’ve entered greedy level)? Human emotion is something which can never be changed no matter what since the creation of stocks markets decades ago. Guess how the market-makers and professional investors make money?

While there’s no total solution to eliminate emotion, you can minimize it by using tools – that’s entering your selling price and go away. You can use “trailing stop” (only applicable to certain equity market instrument) to maximize your profit, hence eliminate your fear or greed.

Conclusion

There’re of course more things you should do (I’ll leave that for another post) but above are the top 5 things you should do to at least win the battle against the market-makers, professional investors and the crowds. Win enough battles and you might win a bigger war. Of course above are just my investing and trading methodologies. It varies from person to person’s style and you have the full right to disagree.

There’s no right or wrong strategy, as long as you’re making money – your strategy is the right strategy. Happy Investing!


Adopted From : financetwitter.com

Posted in: Economy,Investment,Richest Man