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Sol Palha is the head financial analyst at Tactical Investor. He is a self-taught Student of the Markets, having widely read conventional and non-conventional texts on all aspects of technical analysis, Mass Psychology and philosophy (as he believes it can be quite useful in terms of market... More
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  • Trading mistakes to avoid  0 comments
    May 10, 2010 12:30 AM
    A very common mistake that is made by novice market players is that they confuse the term stock market trading, with stock market investing. Then you have investors who confuse the term long term investing with the concept of buy and hold, there is nothing one should buy and hold forever, if you do so the concept should be called buy and fold.

    The Investor looks for a trend and buys early in the trend; he/she then rides the trend until it ends. One should learn the basics of trend analysis as it will help one determine when a new trend is about to start.  Now let’s go back to the topic of Trading vs. investing. Stock market traders look for short term rapid gains, they prefer to extract the maximum profit they can from a stock, option, future etc. At least that's the concept behind trading, unfortunately most traders end up losing more than they win, and even when they do win, they usually end up making less than the long term investor.

    A few traders do extremely well, these chaps fall into the 2% category of overall players. Their gains are huge, but for the rest of the players loss is all the can hope to look forward to. The investor, on the other hand, looks for a new trend and usually tries to get in right at the beginning of the trend. If he/she is more aggressive they try to get in when that particular market is putting in a bottom and has been trending sideways for sometime, indicating that the worst is behind.

    Another error that is often made is to confuse long term investing with the rather falsely promoted policy of buy and hold. Long term investing is getting in early and selling when the trend is over. A classic example was the Internet mania of the 1990's. The time to buy was in 1995 and 1996 and the time to sell was late 1999 and early 2000, when many of the Internet stocks started violating their main up trend lines. Those that bought the buy and hold lie, found them selves even poorer than when they took initial positions in these stocks.


    A very important concept one should learn when one seeks to enter the Stock Market, whether he/she is a trader or an investor is to learn the art of being a contrarian. In short a contrarian investor does something that is totally the opposite of what the crowd is doing. At the Tactical Investor we have always been known for taking extreme contrarian views, sometimes even contrarians have a hard time digesting some of our views. On that note we believe right now, we are in a multi year commodities bull market that is in its infancy and for those who are fortunate enough to invest in the right companies, the rewards are going to be enormous. This is your second chance to make millions potentially if you missed the internet boat. This bull market will dwarf the hyper bull market of the internet era. Sectors that will most likely experience the largest gains will be the Oil, Uranium, Palladium, Gold and Silver sectors .  This is not going to be an easy bull to play, those that buy the buy and hold nonsense could potentially go through some extreme pain as  their gains  vaporize during the massive pullbacks this bull will experience every now and then.


    Another concept that is often forgotten and separates the stock market winner from the stock market losers is
    portfolio management . Portfolio management is essential it is one of the most important and most neglected areas when it comes to investing. Many a trader or investor who could have otherwise been successful ends up losing year after year. All the topics mentioned above are covered in much greater detail; all you have to do is click on the highlighted words.

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