Wednesday, August 8, 2012

How Essential Is the Stock options trading Method Inside Expenditure?

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Best to sit out a correction in cash, especially if you've booked sizable gains from last year's rally. Other sensible moves include:

1) Protect your gains. There is no conceivable reason to watch them disappear. You can either sell outright or put tight stops under your holdings.

2) Cut your losses. There is even less reason to sit and watch your losses deepen. If you bought too late, don't let hope or pride of opinion get in the way. Admit that your timing was off and exit while the pain is still minor.

3) Don't rush back in too soon. The big guys need liquidity to sell. Every known trick will be employed to lure you back into the market and sell you overpriced merchandise, from pundits' calls for action to sharp counter-rallies.

4) Don't try to beat the market and find stocks that you think will go up while the market is going down. They are sure to be there but your odds of finding and riding them up are not good. Keep your powder dry. There will be another day. If you let the market jerk you around, you will be too bruised and exhausted by the time you should be getting back in.

5) Don't chase fallen zoomers because they appear cheap. Few ever come back. You may analyze their moves but will be better off finding fresh new names going forward.

6) Corrections also help determine who your friends are going forward: stocks that suffer the least damage are usually more likely to fare well in the next upturn.

7) Corrections reset bases and give new zoomers time to emerge. Look for new themes.

8) Analyze your past trades. This is the only way to learn, and the best time to do it is when you are out of the market.

9) Relax. Take a break. Read a book on stock trading, spend time with your family, start that home project you've been putting off.

10) Watch for signs of the correction ending. Corrections end when new leaders begin to emerge, not the other way round. Investors who rush back into the market too soon and get burned are usually the same ones who are too late to join the rally. Early zoomers produce the biggest gains. You don't know when the next move up will start but you must be there to recognize and take full advantage of it.

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