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Tuesday, January 29, 2013

The 10 Commandments

1. Thou shall not go against the trend.
If it be down, let it be down. The market is bigger and stronger than you.
Follow the market but be one step ahead of the crowd.

2. Thou shall not follow the herd instinct
Just because many people are buying a certain stock does not mean you should follow suit. If people want to buy rubbish stocks, that is their bad luck. Don't make it yours.

3. Thou shall treat the market as a business, not a casino
The stock market is not meant to be a casino and you should not be there to gamble.

4.Thou shall not buy high-debted and no-earnings stocks
All companies that folded are highly geared with negative earnings. Don't buy rubbish shares; don't buy somebody's liabilities.

5. Thou shall only buy solvent companies with good-growth prospects
Present earnings are important, but future earnings are more important. That's why we have companies selling at high PER (Price earnings ratios).

6. Thou shall not be overconfident
Overconfidence leads to overtrading. Once you overtrade, you may not be able to control your own emotion. Fear may set in when the market is not going the way you expect it. It may disrupt your plan, turning your profitable trade into a loss.

7. Thou shall invest within the comfort zone
Don't be too greedy; don't play with borrowed money. Debt is a disease. It can cause you a lot of problem if you are not careful.

8. Thou shall be patient
The market is designed to transfer money from the impatient to the patient. You must have very good reasons before you switch counters. Very often, the shares you sell move up faster than the shares you buy.

9. Thou shall be disciplined
Don't change your strategy at the eleventh hour. If you have placed a stop-loss in your chart, don't remove it unless it is replaced with a trailing stop-loss.

10. Thou shall be knowledgable
Investment in knowledge pays the best dividend. No one is so skillful that he cannot better his best. Keep learning for knowledge is boundless.

Happy investing.