Know at what price you'll take profit/loss BEFORE investing.
This is one of the most important lessons in investing in stocks (and some other assets): you have to know at what price you'll take a profit and, much more importantly, at what price you'll take a loss. "Buy and hold" rule might or might not work for ETFs, index and mutual funds, but it could kill you when investing in stocks. Look at GM, Lehman Brothers, Enron and countless other examples. If people who lost all their money with these stocks had stop loss set at 5%, this is all they would loose.
So what is stop loss? It's a very easy concept: you simply decide, that if stock falls 2% or 3% or 5% (or $0.50, $1, etc.) from the price you bought it, you sell it no matter what. Think about it: when you buy a stock, you are hoping for it to go up. If it starts falling rapidly, it means you were wrong in that decision. There is no reason to pay for this mistake with all your money. Instead, you are using stop loss: taking 2% loss and keep looking for better opportunities.
The best way to comply with the stop loss rule, is to put a stop loss order immediately after you bought the stock. Most brokerage companies offer this kind of trade. If you are not sure how to do it, study it and then practice with a very small position.
Most people generally hate an idea of taking loss. On the other hand, most people are happy to walk away even with a small gain. As the result of this psychology, they let losses run indefinitely but take profits rapidly. Hence majority of new investors loose money when trading stocks. Don't let this happen to you - ALWAYS use stop loss when buying stocks.
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