Saturday, July 31, 2010

Ride the Bull

Ride the bull for high returns. This is easier said than done. The picture above shows that unless you have the skill to handle the jump, twist and turn, you will be thrown off within a minute.

In rodeo, a cowboy tries to stay on the back of a bull for as long as he can, to score points. In the stock market, an investor should stay long as long as possible, in a bull run, to maximize profits.

Many people make the mistake of cashing out too early. Instead of letting their profits run and their losses cut short, they do it the other way round. Hence, when they make money, they make little, but when they lose, they lose much.

Anyone who trades on thin margin is heading to the slaughter house. You can never win big by only taking small gains. The trick is to go after strength. When you buy a stock, you should average up when the price rises.This is not easy to do unless you have the experience and the financial muscle. In this respect, technical analysis may help, but this is not a foolproof. At best, it is only odds in favor. However with much experience, you should be able to perform better than the average.

Even at a times when you are greatly satisfied with a good profit, don't sell everything. Take some profits and fight with the balance. Use a trailing stop. This is a good way which may serve you well.

Good luck and happy investing.