3 Simple Rules to Avoid Losing Money

Editor’s Note: Discover How to Trade Facebook, Google, Netflix and the Fastest-Moving Stocks
Trading momentum stocks is one of the fastest ways to earn quick profits.
These same trading tactics are already producing gains of $2,091 in 10 days … $4,985 in 14 days … $3,194 in seven days … $2,437 in 14 days … $2,557 in 13 days … $2,902 in 12 days … $2,213 in 20 days.
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Investing mistakes can be painful and costly.losing money
However, my biggest personal investment losses have been the most powerful learning moments. They have formed my approach to trading and made me a better investor.
My goal is to help you become a better investor and trader. To help you succeed, I’m going to share my biggest mistakes with you.
Avoiding these three mistakes can make the difference between success and failure. Don’t make a difficult job more difficult than it needs to be by committing these basic errors.
One of my early trading mentors gave me a wise piece of advice: “Never make the same mistake twice. The second time you make it, it’s no longer a mistake.  It’s a choice.” That quote is still taped up on my trading monitor today.
Here are my three simple rules that will help you avoid losing money with your trades.

1. Stop Holding On to Losing Trades

Price is truth. Stocks are priced based on all information known to the market. Not all investors have access to the same information at the same time. And while that may seem unfair, if I objectively observe price action I’m able to balance my opinion with factual data.
I may have a belief about what a stock should be worth. But, the truth is, the market does not care about my opinion.

2. Don’t Fight the Tape

“An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force.” -Isaac Newton
Once a trend is established, it’s more likely to continue than it is to reverse. That is one of the principles upon which technical analysis is based.
The definition of an uptrend is “higher highs and higher lows.” By its very definition, a stock in an uptrend has more opportunity for profits going “long” than trying to “sell short” for the pullbacks. The sum of the rallies will always be greater than the sum of the declines in an uptrend, and vice versa.

3. Never Chase Price

Confidence moves in direct proportion to the price action. In order to profit from trading, we want to anticipate when stocks will move and then participate once the actual momentum starts.
It certainly can be lonely to be among the first buyers of the short-term higher high when trends become aligned. But if you truly understand price structure and have a stop-loss in place, then your loneliness and doubts will be replaced with confidence.
No one knows with 100% certainty whether a trade will be a winner. For this reason, I use money management principles for position sizing and risk management to cut losses if the market doesn’t agree with the position.
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