Our 4 Golden Rules

There are many so called "rules" in investment markets. Some work all the time, some just some of the time, and some, just now and again. There's a lot of hot air out there about all sorts of "guaranteed" rules for making your fortune.

What we need, are rules that actually work.

We need rules that actually do help you make money whether the market is going up, down or sideways.

There are many lessons and rules to be learned along the road to becoming a successful stockmarket investor and here are four good ones to start with. It does pay to remember them well.

1. If you can't afford to lose, you can't afford to win
Losing is a natural part of stockmarket trading. Don't play with money you cannot afford to lose, or that you need for daily living expenses. Markets go do go down as well as up.

2. Adopt a definite trading plan - and stick to it
You need a "big picture" based on a sound strategy. An ad hoc approach leads to ad hoc results. Wise-owl.com helps prepare comprehensive investment plans for all types of investors, for all sorts of budgets and goals.

3. Cut your losses and let your profits run
Knowing when to get out is vital. Once again, that means planning. The saying "you win some, you lose some" applies to everybody, including you. Before buying, set a low-end trigger price for getting out. At the same time, nominate a price that fulfils your investment goals, at wise-owl.com we use these "Profit Stops" to sell before profits turn to losses.

4. Adopt risk and money management
It can take only one significant losing trade to wipe out all your gains, no matter how well things seem to be going. Risk associated with any investment must always be evaluated. So it is wise to invest less money in riskier investments to avoid devastating losses. A Stop Loss price clearly establishes how much you are prepared to lose. Establishing a Stop Loss price before buying, means you know how much you're risking should your shares go south.

The amount of money you are prepared to risk is called risk capital, and the risk capital on each trade should never be more than 2% to 3% of your portfolio value.

To explore how these rules are put into practice in our reports, click here to register for a two-report trial of our Equities Report,  here for our Derivatives Report or here if blue chips are more your style with our ASX200 Report.