When I launched my Millionaire Challenge as a way to teach the countless students I have from all over the world, I did so as a way to help teach others how to make a living off of the stock market. In the process, I have helped countless students make more money than they ever thought possible, working from wherever in the world they wanted. During this time, I have dedicated myself to teaching my students all about how to find success through trading, but if there is one thing that I emphasize more than anything else, it is that any person who is trading needs to know how to protect themselves in the market.
It may not seem like a particularly important part of trading, and while it isn't as exciting or as glamorous as counting the money you make, it is very important. If you aren't able to protect yourself in the stock market, you may end up making a very serious mistakes, mistakes that could cost you a great deal of money.
I am not a perfect trader. Yes, I have made over $4 million in trading profits, but I am not immune to making mistakes. Sometimes I even fail to do the right things to protect myself in the market. I know my weaknesses as a trader, and in order to protect yourself in the market, you need to know your weaknesses as well and know what you can do in order to protect yourself from these weaknesses. Here are some of the best ways that you can make sure you are protecting yourself in the market and not making mistakes that will take advantage of your own vulnerabilities.
Trade Scared
You need to be a little scared if you want to make smart moves in the market. If you don't have a little apprehension behind your trades, you can end up being overly-confident and start making stupid moves. I am a confident trader and an even more confident teacher, but I am not a "ballsy" trader. I have learned that these types of traders never do great in the long run.
Cut Your Losses Quickly
You need to know when to cut your losses and you need to be able to cut them quickly. If you dwell too long you can end up losing much more than you bargained for. This is one of the reasons that I always try to hit singles or doubles instead of going for all home runs, because I know there are going to be times when I need to cut my losses.
Don't Use Leverage
I never use leverage when I trade. What is leverage? It is when you use a variety of borrowed capital or financial instruments to increase the potential return of an investment. Leverage comes with a great deal of risk, and when an investor leverages and loses, they lose a lot more. What is my solution? I just don't use it.
Trade Volatile Stocks
Trade volatile stocks. Why? Because they move and they tend to stay volatile. You need to watch them, but when you do you can start actually making money. One of the biggest problems I see with investors today is that they don't trade volatile stocks.
Take the Meat of the Move
Don't try to catch the exact bottom or top of a stock. This will only get you in trouble. Instead, just try to take the meat of the move. Trust me, you will see over time, this will really help you start gaining serious profits.
Keep the Right Mindset
As so many of my students have demonstrated, the right mindset is one of the best tools you can have when it comes to protecting yourself in the market. You don't need to be aggressive, you actually need to be calm and keep the right mindset if you want to be successful. Keep that in mind, and keep these tips in mind and you can go a long way in making smart decisions in the stock market and keeping yourself protected from mistakes that could cost you a great deal.