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1) Do not trade expensive stocks. Their percentage-gain is lower. Thus, you need to have more capital even for less amount of profit. Moreover, expensive stocks attract big players. Do not compete with them until you’re a fat cat yourself.
2) Do not trade famous stocks. Big players employ their best investors and analysts on these famous stocks. Do not play in the Premier League when you are just a rookie.
3) Avoid trading stocks with insufficient volume. Although you profit only because stock prices fluctuate, you do not want random fluctuation by a handful of investors.
4) Trade stocks with a lower bid-ask spread.
5) Do not buy stocks from the underperforming sector and industry. Trading is a game of probability. You want the odds to be in your favor before you enter a trade.
6) If you miss the stock train do not chase it. A stock that your trading strategy approves might not be that great if you buy it around the peak. So, if you’re late to buy it, ask yourself, if I had bought it earlier, would I sell it at this point? If the answer is yes, don’t get into the stock. DO NOT ENTER.
7) Be mindful of support and resistance. Do not buy a stock near either of these extremes. Wait until the stock breaks through the price levels.
8) Do not trade penny stocks. They are targeted by pump-and-dump traders.
9) Do not sell or buy because everyone else is doing so. Do your homework. Mania-buying and panic-selling are both bad. Do not leave your best partner because the divorce rate is going up. This especially applies to long-term investors.
10) Do not gamble with a company’s imaginary earnings. Before a company reports its quarterly results, “analysts” predict their earnings per share (EPS). The stock buy-or-sell trend is determined by whether the company reports more earnings than predicted or less. Abandon the guessing altogether.
Click here to access all the articles of the NEPSE Investing Guide Series.
