Don’t apply logic to the stock market
So often I see people make decisions in the market on what makes sense to them. It makes sense to buy stocks when the company insiders are buying. It makes sense to buy stocks that are making positive announcements. It makes sense to listen to what the President has to say about the company’s prospects. However, all that matters is what the market thinks of the company and whether the buyers are more motivated than the sellers. So often, the market does things that do not make any sense until we later learn of what motivated the market to do what it did. Remember, the market is forward looking, most times, what makes sense is judged on what has happened in the past.

Never average down on a losing position
Buying more of a bad thing is not much different than continually betting on a losing horse. Winners win for a reason, and until your stock starts to show that it is a winner, don’t add more to a bad situation. If you like a company whose stock is losing you money, sell it. You can always buy it back later when the market starts to like it again.

Successful investing is not about being right, it is about making money
Most good traders are usually wrong. They will lose small amounts often and make big amounts occasionally. What matters is how much they make over a large number of trades. Don’t try to always be right, simply work to make money. (more…)