Rule #5 Define the amount you want to invest and review it once a year. Please start with the amount that you are ready to lose. In full. You may ask me why so? Thing is – when you did your first let`s say $500 by investing $5k as a starting capital, your next thought will be – I can make $5K in one shot if I only invest $50K, after that, I would quit immediately. Here is the catch – it would never happen. So decide to operate within $5K (or any other amount which is not critical for your budget) for the first year, and take this as a learning path. After the first year, you would know what to do.
Rule #6. Consider that you made a profit not on paper but on your account. It means that you had a good month, your balance at the end of it was $20K higher than you started this month and you are over-optimistic to start the new chapter (you are a saucerful investor so why not?). Then you invest all your money and somehow the end of next month doesn’t look so bright. So my rule – you made a profit on paper – cash it out to your account and only after that, you can consider this as your profit.
Rule #7. Play safe – close position. Because disappointment of slightly less but fixed profit would last far less than the damage of missed opportunity. I`ll give an example – I see the potential profit for one of my positions in my portfolio, it is very close to what I want to make on this position, not yet it but very close, today is a Friday, and the weekend ahead and I decided to close position even with that amount and not wait until Monday session. Because on Monday situation was completely different due to the news about this company that came out on a weekend, the stock price drops, and I would receive negative results in case if I would wait.
Rule #8. Don’t borrow. Always play with your own money. Because this is the maximum amount you can lose. In case when you are using the company`s funds (many platforms are offering such an option after some time) – you can lose far more money. Don’t do this.
Rule #9. Don’t go short. A short position is the most dangerous one for those who have no experience, patience, or enough money, and are still nervous. I can recall the situation with Tesla stocks and their tremendous and extremely fast growth. All investors who kept shorts crashed and smashed in a week. But those who were patient enough to look at huge minus during the ˜8 months at the end of the day were able to recover. That was a painful story for me also. I paid a lot for this lesson and I learned it well. Please, read it one more time.
Rule #10. Don’t become a slave of the stock market. Meaning trying to balance the addiction by decreasing the amounts. Don`t be dependent on today`s news. Don’t let the earning calls of big companies define the quality of your life and even your weekend mood. It`s just money and there are many different ways to make them.