4 Golden Rules to become Successful Investor.

Four Golden Rules to becoming a successful investor.

If you cannot afford to lose, you cannot afford to win
Losing is a natural part of investing/trading in the stockmarket.
The stockmarket is not for people who cannot afford to lose any of their money.
If you are not in a position to accept losses, either psychologically or financially then the stockmarket is not for you.
Money invested should only be done using surplus funds that are not vital for daily expenses.

Make and stick to a trading plan
Everyone needs a pre-determined method of operation in the stockmarket.
People that do not have a trading plan are like ships without rudders and are destined to lose direction and crash.
Without a trading plan, your emotions will lead you to costly mistakes. Wise-Owl offers a complete trading plan for investors from all experience levels.

Cut your losses and let your profits run
The basic failure of most investors is that they put a limit on their profits and no limit on their losses.
People hate to admit that they got it wrong.
Many fundamentalists research their investments and stick by their view.
That is all good but “how much does the investment have to trade against me before I am willing to accept that I am wrong?”
This question must be answered before each trade is entered. The key to successful trading is cutting losses quickly and holding onto winning trades.
Often investors sell out of winning trades, only to see the stock trade a lot higher.
However, it is more disturbing to see an unrealised profit of 60% turn into a losing trade. It is very difficult to pick market tops and bottoms. Wise-Owl uses profit stops to help investors manage their investments. Profit stops are like safety nets that protect unrealised profits.

Adopt Risk and Money Management
No matter how successful you may be trading, it only takes one losing trade to wipe out all your gains.
The risk associated with an investment should always be considered.
Less capital should be allocated to riskier investments to avoid devastating losses. Stop losses should always be set-up before a trade is entered.
This enables you to know how much money you are risking should the investment turn against you and trade to the stop loss.
This is called risk capital (ie how much you are risking).
The risk capital on each trade should never be more than 2% to 3% of your portfolio value.

Adapted from Investment Wise (Wise Owl)