Ten Guidelines for Enjoying The Stock Market

I get so many questions from people that say they are beginners and they always seem so confused. I generally tell them that I wish I knew than what I knew now, which is to keep it simple and find a mentor.

The markets can be very complicated…or insanely simple. The hardest part of investing is keeping it simple. The second hardest part is finding someone to help you keep it simple and than someone else to back that person up and so on….

I love reading about the economy and the markets, but for the time spent, I might have been better off as a lawyer just billing my time :) .

For all the beginners and those looking for a fresh start, this post is for you.

Here are ten rules to follow to enjoy the Stock Market:

1. You are not privy to inside information. Ignore tips.

2. If you are investing fake money or money you cannot afford, you should be working to earn and save enough money to do it with money you can afford to invest with.

3. Once you have enough money to invest (5-10 individual stocks) just start. Pull the freaking trigger. Feel the rush.

4. STOP doing it for the rush.

5. If you are going to invest, keep your costs as low as possible. Be cheap.

6. Learn to recognize healthy markets. I define healthy as hundreds of uptrending stocks with institutional support. Stocks trading above $15-$20 with volume of 500,000 shares or more. I want to fish when/where fish are jumping in the boat.

7. Read less about stocks and markets. A daily check at an aggregator like AbnormalRetrums.com is truly all you need to stay ‘cocktail party’ smart.

8. Prune Prune Prune…NEVER get to the point where you dread looking at your statement. NEVER. Find a backup to hold you accountable. Find another.

9. Keep a journal, blog, Stocktwits account..something to keep you even more honest with at least yourself. You will invest better.

Not sure if I missed something so please chime in with your thoughts so I can fill in a tenth….

55 comments

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  11. Ben Weiss says:

    Great list Howard! I find #8 to be the most critical – it’s hard to stay unemotional, particularly when we’ve gone through so many ups and downs over the last few years. However, some cold, hard calculations should be able to keep your investing activity in line (as would a good set of ‘trailing stops’ to protect the downside)…

    Wish I had that advice a few years ago before I took a healthy stake of money and blew it on a dumb penny stock touted by Jim Cramer. Easier said than done.

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  15. Dominic Di Bernardo says:

    Number 10 should be to Plan. It is important to have a detailed plan for each and every trade. You need to be prepared if the stock trades against you and in your favor and know what you are going to do ahead of time.

  16. Pingback: Howard Lindzon » Blog Archive » Ten Guidelines for Enjoying The …
  17. I agree very much on keeping it simple. This is especially important for seasoned traders that have enough knowledge to go off in 20 different directions. When I was in law school, I started off by studying every case I could get my hands on to get an edge for the exam. I did ok, but it didn’t work out so well. Then I started to study less, but focus on “what has to be on the exam.” I would focus and keep things as simple as possible. It worked, I started getting excellent grades and was putting in a lot less time. The market is the same. It is easy to lose focus. In fact, I would say most trade without a sharp focus.

    You have to filter out all strategies and ideas that are not absolutely necessary to hit your goal of making a good return. If you believe a trade or method is not critical to achieving a good return, then get rid of it. I constantly ask myself what I can do to simplify things.

  18. Ben Weiss says:

    Great list Howard! I find #8 to be the most critical – it's hard to stay unemotional, particularly when we've gone through so many ups and downs over the last few years. However, some cold, hard calculations should be able to keep your investing activity in line (as would a good set of 'trailing stops' to protect the downside)…

    Wish I had that advice a few years ago before I took a healthy stake of money and blew it on a dumb penny stock touted by Jim Cramer. Easier said than done.

  19. Dominic Di Bernardo says:

    Number 10 should be to Plan. It is important to have a detailed plan for each and every trade. You need to be prepared if the stock trades against you and in your favor and know what you are going to do ahead of time.

  20. I agree very much on keeping it simple. This is especially important for seasoned traders that have enough knowledge to go off in 20 different directions. When I was in law school, I started off by studying every case I could get my hands on to get an edge for the exam. I did ok, but it didn't work out so well. Then I started to study less, but focus on “what has to be on the exam.” I would focus and keep things as simple as possible. It worked, I started getting excellent grades and was putting in a lot less time. The market is the same. It is easy to lose focus. In fact, I would say most trade without a sharp focus.

    You have to filter out all strategies and ideas that are not absolutely necessary to hit your goal of making a good return. If you believe a trade or method is not critical to achieving a good return, then get rid of it. I constantly ask myself what I can do to simplify things.

  21. Jack Damn says:

    Programming my butt off. I'm finishing up two trading programs (one for me and one for a client), and I'm in the final push on an animation project. Last animation gig for this year. Will be back to full-time trading after I get about a month worth of sleep. :)

  22. Michael Bigger says:

    I like #9 very much. Keeping a journal or a blog is one good way to iterate and improve your processes after you make a mistake….and you will make plenty.

  23. Michael Bigger says:

    I like #9 very much. Keeping a journal or a blog is one good way to iterate and improve your processes after you make a mistake….and you will make plenty.

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  27. Anonymous says:

    Great list. My #10…Study the best, but find a style and timeframe that matches your psyche, make it your own

  28. derekhernquist says:

    Great list. My #10…Study the best, but find a style and timeframe that matches your psyche, make it your own

  29. Anonymous says:

    Beginners should start with ETFs. Sector specific ones, if they want to make predictions. Total market if they don’t. I’m with JD, $VTI is my favorite.

  30. HaphazardTrader says:

    Beginners should start with ETFs. Sector specific ones, if they want to make predictions. Total market if they don't. I'm with JD, $VTI is my favorite.

  31. Anonymous says:

    I like #9.
    I’ve found out that starting a blog has increased my motivation to writing down my thoughts, ideas and progress as a trader.I also keep a trading journal but I almost never read it, but I read my own blog quite frequently, how weird is that….
    #10
    Love what you do.

  32. traderivar says:

    I like #9.
    I've found out that starting a blog has increased my motivation to writing down my thoughts, ideas and progress as a trader.I also keep a trading journal but I almost never read it, but I read my own blog quite frequently, how weird is that….
    #10
    Love what you do.

  33. Anonymous says:

    When prospective buyers out number sellers, the price rises. Eventually, sellers attracted to the high selling price enter the market and/or buyers leave, achieving equilibrium between buyers and sellers. When sellers outnumber buyers, the price falls. Eventually buyers enter and/or sellers leave, again achieving equilibrium

  34. henrystockchat says:

    When prospective buyers out number sellers, the price rises. Eventually, sellers attracted to the high selling price enter the market and/or buyers leave, achieving equilibrium between buyers and sellers. When sellers outnumber buyers, the price falls. Eventually buyers enter and/or sellers leave, again achieving equilibrium

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