Newbie Do's & Don'ts

[Capitalist]

A Newbie DON'T

DON'T give in to fear and greed. This is what the professional traders and market makers will use against you!

One of the boards on iHub (AIM Users) actually has the slogan "Buy from the scared, sell to the greedy!" Think about this. Are they buying from you when you panic and selling to you when you have dreams of mansions rolling around in your head?

The way to defeat FEAR is to trade smaller. If you're nervous about a position bring it down to the "sleeping point". Smaller positions have the advantage that you can set wider stops and avoid the intraday shakeouts by which the MMs will use your fear to buy your shares from you at bargain prices.

The way to defeat GREED is to TAKE SOME MONEY OFF THE TABLE when you have profits. That stock you bought that is up 200% can just as easily go back to where it started. And it only has to lose 67% to do it! ($1.00 plus 200% is $3.00. $3.00 minus 67% is $1.00. Go figure.) The majority of the big selling that allows large traders to take their profits occurs when they are selling into a huge blowoff spike in a stock. This is how they move large volume. And who's letting them do it? The greedy newbie who doesn't realize he/she is about to become the mother of all bagholders...