Investing Strategies - 4 Mistakes That Can Doom Your Investing Strategies

Mistake 1 - Buy Long Only

Prices go up. Prices go down. Prices go sideways. Investing strategies that work only when prices go up will be losers.
* You'll win only about a third of the time.
* You need investing strategies for down markets and sideways markets too. Here are some you can easily learn to do:

In a down market -
* Sell short.
* Buy inverse ETFs.
* Buy put options and other option strategies for down markets.
* Buy "hedges" - what goes up when the rest goes down.

In a sideways market -
* Use non-directional option strategies.

All this may sound scary, but it's easy. All you need is a little coaching.

Mistake 2 - Fight the Trend

Stock prices can trend up or down. They can drift sideways. When there is a trend, go with it.
* Buy long in an up trend. Sell short in a down trend. Prices go up and down even when there's a trend. Prices always wiggle.
* An up trend means up moves are bigger than down moves.
* A down trend means down moves are bigger than up moves.

Many would-be scalpers fight the trend.
* They try to sell before the brief downs in an up trend.
* They try to buy before the brief ups in a down trend.

Don't do it! Here's why -
* Price moves against the trend are smaller than price moves with the trend.
* Down moves in an up trend are smaller. Up moves in a down trend are smaller.
* Fighting the trend means chasing smaller profits.
* Few people can time the brief moves inside a trend. Don't try.

Smart investing strategies follow the old saying "the trend is your friend."

Mistake 3 - Buy Without Knowing Why

Most people buy without knowing why. They get a hot tip from a pal. They see a TV report. They read a newspaper. But investing strategies take research.
* What will move the price?
* When will this happen? How long will it last?
* How big will the price move be?
* What could throw off your plan?
* What is your chance of success?

You raise your risk if you don't even think about these questions.
* Don't ask questions after you buy. Ask before.
* Take your time. A decision made in mere minutes is risky.
* Get good advice. You'd research a new TV or computer buy. Do as much for your investing strategies.

Mistake 4 - Give Back Your Profits

What should you do after you go into the black? Never let a paper profit turn into a loss.
* Protect your trading capital - the number one goal of investing strategies.
* Strategies that reduce risk are the long-term winners.

Trailing stops are the best way to exit with a profit.
* Place a trailing stop order right after you buy.
* Your broker sells if the price falls to a price you name.
* Your biggest possible loss should be no more than 3% of your total trading capital.

Trailing stops move up as the price rises.
* For example, if you buy at $50, with a 10% trailing stop you'd sell at $45 ($50 - 10%).
* If the price rises from $50 to $60, you'd now sell at $54 ($60 - 10%).
* Trailing stops never fall, even if the price falls.
* Once your stop rose to $54, it would not go lower. No matter what happens to the stock price.
* You'd keep at least $4 of your profit after the stock rose to $60.

Trailing stops get you out before all your profit vanishes. That keeps a profit from turning into a loss.