When you click the button to buy a stock, what is going through your mind?
Do you feel the buzz of excitement wondering how much money you are going to make?
Do you have visions of the price rocketing higher with you on it?
We all do…
But what if I was to say to you that your job is to think about the worst that can happen and prepare for it?
Your whole trading plan should involve expecting the stock to crash to zero.
If that were to happen, do you have a set of rules that could make sure you walk away with your shirt on?
We are heading towards the Christmas trading period, which can be pretty dull. I thought it would be worth your while to put together a Closing Bell video that gets you thinking about your approach to making money in individual stocks.
It usually takes a few trading disasters before investors realise they aren’t as smart as they thought they were.
Stocks are far more volatile than most people realise.
A $5.00 stock can fall to 10 cents.
We have just seen many stocks do that over the past few years.
You can either buy a stock, and kiss the money goodbye as it goes in by having no stop loss at all. Or you can aim to preserve your capital by using volatility to your advantage.
The way trends develop and turn around have some interesting characteristics that you should know about.
Remaining humble and aiming for realistic goals, while always respecting the markets’ ability to do things you never expected is what is necessary for success.
So, I hope you enjoy today’s trading lesson. I want to get you thinking about how you have traded in the past and how you will take the lessons from that to improve your trading in 2025.
To learn more about how you could become a consistently profitable investor in 2025, just read my comprehensive report on the key lessons I have learned over my career in the financial markets.
I’ve put together insights from my 30+ years of trading that will help you become a better investor.
I believe that the key to high returns without stress, is knowing you can survive any market conditions. To do that you need a risk management process that handles immense volatility.
I put this into action in my service Retirement Trader.
You can learn more about my approach by clicking here to get access to 30 years of trading knowledge.
Regards,
Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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