Ten Ways To Lose All Your Money August 18, 2006

“Top 10 Ways To Lose All The Money In Your Trading Account In 30 Days Or Less – Guaranteed!”

I hope the author doesn’t mind me republishing his “Top 10″ here – just in case that link becomes invalid someday. They’re just too good to lose:

Top 10 Ways To Lose All The Money In Your Trading Account In 30 Days Or Less – Guaranteed!

#10 – Put all of your efforts into finding the perfect technical indicator. Once you find this magical indicator, it will be like turning on a water faucet. Go all in. The money will just flow into your account!

#9 – When your technical indicator says that the stock is oversold, BUY IT RIGHT THEN. Always do what your technical indicator says to do. It takes precedence over price action.

#8 – Make sure to visit a lot of stock trading forums and ask them for hot stock tips. Also, ask all your friends and family for stock tips. They are usually right, and acting on these tips can make you very rich.

#7 – Watch what other traders do and be sure to follow the crowd. After all, they have been trading a lot longer than you so naturally they are smarter.

#6 – Pay very close attention to the fundamentals of a company. You MUST know the P/E ratio, book value, profit margins, etc. Once you find a “good company”, consider going on margin to pay for shares in their stock.

#5 – Forget about developing a trading plan. If you see a good stock just buy it. Don’t worry about when you’re going to sell. No need to get caught up in the details. Besides, you’ll probably get rich the first year of trading anyway.

#4 – Buy expensive computers and trading software. While your at it, buy a couple more TV’s so that you can watch CNBC on multiple screens! You NEED all of these gadgets in order to trade stocks successfully. Then watch the money roll in!

#3 – Always follow your emotions. They are there for a reason. If you feel nervous, sell the stock! If you are excited, buy more shares. This is the best way to trade stocks and fatten up your trading account.

#2 – Don’t worry about using stop loss orders. When the time comes, you will be able to sell your shares and take a loss. Your emotions won’t even come into play. Besides, stop loss orders are for sissies!

#1 – Absolutely, without a doubt, FORGET about managing your money. Don’t worry about how much you can lose on a trade. Only think about how much loot your gonna make. Then start planning that trip to Fiji!

Well, there you have it – my top 10 tips for new traders.

This list was easy to write.

I followed them all when I first started trading.

Sitting Duck August 5, 2006

Volkmar Hable is pretty bearish on the market, and has been for some time. But that’s not the point I’d like you to take away from his column this week.

You can be bullish if you’d like, or you can be bearish as all get-out, it doesn’t matter. You still have to understand, and implement, a plan of risk management:

I had an extraordinarily funny comment by an angry reader last week who suggested that FTSE and DAX should reach 30,000 respectively. The reason for her anger: her investment advisors believes in that obviously extremely bullish scenario and invested all her savings into long positions. She continued that my – quote: “…warnings of an impending decline makes her so nervous that she cannot sleep anymore and that I should stop writing such frightening and stupid things…” Apart from the obviously very risky assumption of a strong rally next year, her comments reflect a complete lack of risk management, which is the reason that I am mentioning this issue anyway in this week’s investment Commentary. I have had repeatedly questions concerning “how much money” one should invest, and I would like to answer this collectively here…

Read his response to the reader, and realize that you, too, must have a plan. It’s great when things are going your way. But when they’re not, you have to know what you’re going to do to stay in the game. Remember: Never lose big.

One should never risk his/her your hard earned money with foolish assumptions on possible phantasy profits. If you do, you will be a sitting duck for the mother of all losses.