TOP STOCK-MARKET RULES

These are some rules for equity traders.

1^st Stock-Market Rule

“The Market is Unpredictable”

You can never predict the future, if you ever can, don’t waste your time investing in stocks and other financials. 

• Don't try to outsmart the market, instead, build several scenarios based on probabilities.

2^nd Stock-Market Rule

"Portfolio Diversification is Crucial"

Always diversify your portfolio, risk diversification is the only rule that applies in every single asset class.

• Diversify your holdings in terms of different asset classes, different assets, different countries, and different currencies.

3^rd Stock-Market Rule

"Smart-Money is Stronger in the Short-Term"

When you trade the market in short time periods (i.e. intraday), you compete with skilled professional traders and other market specialists (hedge funds, dealing rooms, etc). These professionals are called 'Smart Money'.

• Smart money is almost invisible and cannot be beaten by retail traders.

4^th Stock-Market Rule

“Buy The Rumor, Sell the Fact”

Buy the rumor and sell the fact is a tactic widely used by professional traders.

• Stock-market prices incorporate all rumors at early-stages.

5^th Stock-Market Rule

“The Quality of The Management is the Key”

Don't ever trust a company if you are not absolutely sure about the quality and consistency of its management.

• Good management is one of the three factors that matter the most when trading shares. The other two factors are Growth and Liquidity.

6^h Stock-Market Rule

“News is Already Incorporated in Prices”

Don't make investment decisions upon something you read on any website.

• 90% of all news is already incorporated in share prices.

7^th Stock-Market Rule

“The Instinct Misleads”

Don't make decisions based on your instinct. Stock-market is a game of knowledge, information, and logical thinking.

• The human factor is your worst enemy, eliminate your emotions

8^th Stock-Market Rule

“Wide Stock-Market Popularity is a Sell Signal”

When everybody is talking about the stock market, it is a strong sell signal.

• Always trade contrarian to the herd.

9^th Stock-Market Rule

"Managing your Overall Portfolio Risk Matters"

Manage your investment-portfolio decisions according to your overall portfolio risk. Don't focus solely on the individual risk of your positions.

• Be aware of the correlations between different assets and different asset classes (Intermaket Analysis).

10^th Stock-Market Rule

“A Bullish Market that is Expensive is more Secure than a Bearish Market that is Cheap”

Stock-Markets move in long-term bullish and bearish patterns. Invest only during the bullish cycle.

• A bull market that is expensive is more secure than a bear market that is cheap.

11^th Stock-Market Rule

"Follow the Trend"

The trend is your friend, follow the trend.

• 75% of all stocks follow the course of their general index.

12^th Stock-Market Rule

"Don't Invest when Cash is King"

During periods of high-interest rates or liquidity crisis, cash becomes king.

• Stay away from equities when the “Cash-is-King”.

13^th Stock-Market Rule

"The Stocks of Market Leaders Perform Better"

In general, the stocks of companies that are market leaders, perform better.

• The stocks of market leaders usually trade above $20. 

14^th Stock-Market Rule

"Keep an Eye on Dow"

No matter which equity market you trade, always keep an eye on Dow Jones Industrial. The Dow Jones is the most important stock index in the world.

• A stock-trade strategy that isn't profitable on Dow Jones, it will not be profitable on any other stock market index.

 

■ Stock Trading Tips

Giorgos Protonotarios, financial analyst

 

Trading Center

You are not allowed to publish, reproduce, translate, merge, sell, rent, or distribute any content on this website (TradingCenter). You are not also allowed to create a derivative work or utilize framing techniques to enclose any content on this website (TradingCenter).