In the past stock investors have had to learn these facts by themselves with painful financial results. If you pay attention to these facts then you will not follow the same path that has affected so many other stock traders.
The first fact is that stocks do not stand alone. In a global economy with investors from all around the world and global trade being the norm, not the exception, stocks find themselves unwitting currency and commodity plays. Since the U.S. stock market is denominated in dollars, regardless of the stock market's strength, if the dollar is weak or strong against the currencies of its trading partners, shares can become more or less attractive. The same goes for the stock market's exposure to commodity price fluctuations. The U.S.'s heavy dependence on oil, gold as a reserve currency, and agribusiness have an affect on the stock market outside of just stock demand. Many people do not know that they can make a profit trading these other markets, forex and commodities, if they fully learn to analyze the market.
The second overlooked fact is that there are many risk management tools embedded into the overall trading framework which can significantly reduce exposure to loss. The key to using these tools is realizing that to prevent a big loss you will have to accept a small loss. These risk management tools can be used by day, swing, and or position stock traders because it gives them the choice on how they want to weather market changes. Once you get into the habit of managing your risk your profits will take care of the losses the majority of the time.
The final overlooked fact is that every stock trader should put more importance on the quality of your trading as opposed to the quantity of your trading. Trading a lot does not mean you will automatically be more successful. It is best to focus on the potentially more profitable trades which have a lower level of risk as opposed to trying to do too much. If you get yourself involved in too many trades at once it becomes very difficult to manage and more prone to error and loss.
Every successful trader takes time to learn how the market acts and where it is going. There are many tools that can help you determine the direction that the market is following. You should study the market then make your investments accordingly. This does not mean you have to catch every market trend, but you will have to invest smartly if you hope to succeed with stocks.
Noble DraKoln is the author of the best-selling books Winning the Trading Game and Trade Like a Pro as well as the wildly popular Small Speculator Series: Futures For Small Speculators, Futures For Small Speculators: Companion Guide, and Single Stock Futures For Small Speculators, available on http://www.amazon.com. He is also a well-known Southern California educator through his investing seminars and mentorship program. He has been a futures investor, broker, and analyst for almost 14 years. You can subscribe to his free monthly newsletter at www.speculatoracademy.com
