We all started from the beginning. Where terms like valuation, target price, support/resistance, hold, IPO, and many more doesn’t makes sense. But oh boy! once you made your first bet, hear almost every beat of your heart, all the indescribable emotions, suddenly you dont think you’re a beginner anymore. Specially when your very first stock you bought shoots up the very next day. I can almost hear that adrenaline running through your bloodstream. Exciting isnt it?
Now lets go back to reality and ask yourself, as a newbie, was it just luck? do you think you can consistently hit that green candlestick? probably not. i have never encountered anyone winning every time.
Here are some tips that a newbie investor may consider when investing in the Philippine stock market:
1 Create a gameplan and stick to it
Open a real or demo account and practice the strategy you have formulated. Copying someone else’s strategy wont hurt either.
Narrow down your trades on one to three stocks just to get the hang of it.
Remember, one or two loses does not invalidate a strategy. There’s no sure proof plan that will win you 100% of the time.
If I’m wrong, please tell me? Please! Please! Please!
2 Stop loss
Learning to take profit is important but not as critical as setting a stop loss. You risk losing your entire capital if you fail to set an appropriate stop loss or none at all.
Remember FNI in 2015? Let’s say you bought FNI at 4.50 in July 2015. You were too stubborn immature to accept the fact that the stock is gradually plummeting down.
Stop loss isnt bad guys. Remember, its better to realize a -10% loss than wait to cut at -50%
3 Preserve your capital
Related to cut loss, As a newbie, your job is to preserve your capital. Imagine this, As a first time driver, you should learn how to be defensive first before trying to win a race against another driver. It may harm you or worse, it may kill you. The moment you accept this idea, you’d be calmer and much more confident when executing trades.
4 Plan your trades in advance
Developing a trading plan not only helps you manage risk, it also prevents you from jumping into trades because the price is suddenly rising or falling.
Planning your trades in advance removes the emotion from the trading equation, reducing pressure on you and the unintended losses that are often linked to compulsive trading
5 Let your profits run
Avoid cutting your profit short. Just because your stock closed on the red zone after 4 consecutive gains doesn’t mean its going down. Sure, there’s a chance that it might free fall. What if you’re wrong?
Try to wait for confirmation signals before taking profit. If you’re a conservative trader, you may set trailing profit – gradual sell off. Who knows, it might break out to an even more heights.
6 Respect the trend
Imagine you’re driving in Ortigas near Greenhills. You’re stuck in traffic for like 30 minutes. Then suddenly, the most important person in the world riding a white SUV counter flowed on the next lane. Observe how other motorist reacts and instantly decided they too are important so they followed. This same mentality also applies in stocks.
When a trend emerges, other traders are likely to jump in, therefore boosting the trend’s momentum and pushing your trades in the right direction.
Always trade with the market’s momentum on your side.
7 Find a mentor
Successful traders spent many years honing their trading skills that you can benefit from. Join groups, be friendly, share your ideas, be open minded. Just don’t be a douche and demand for their precious time.
On some occasion, you may need to spend extra while some are free. Be very careful though and avoid cloudy individuals proclaiming how ginyus they are. If you’re on social media groups, chances are you encountered them already.
Here in the Philippines, there are only very few experienced stock market investor/trader that I personally think are qualified to be mentors. I’m just happy that one of them is my mentor.
