The average investor always seems to be caught with their pants down. They buy when stocks are high and they panic and sell when stocks are low. Ultimately, the institutions have the average investor just where they want them, so the transfer of wealth can continue. Does it surprise anyone that the big institutions have entire quarters where they do not lose money trading on one single day? Most of us would say, "It must be a rigged game!" You would be right. There are ways to combat it though. First, education, you must know the tricks so you can make them work for you. If you can unmask the games played, you can profit for life.
1. Never let emotion come into play. This is the most common way the institutions take your money. When stocks are shooting higher, the media pumps them and analysts upgrade them. Institutions know that 9 out of 10 average investors will chase and buy these stocks at the highs. Institutions are just waiting to pass the stock off to you prior to it falling. Investors are always the bag holders.
2. Risk vs. Reward assessment is the next key. Without emotion, truly look at the stock chart and decipher where it currently sits. All you need to do is see if the stock price is high or low over the last 52 weeks. Ask yourself if it is on-sale compared to where it was a week ago, a month ago, a year ago. Treat the stock market like a shopping mall and stocks like hats, jeans, shirts..ect. Buy solid companies when they are on sale. This mentality will make you thousands if not millions.
These are two of the most common problems small investors face every day. These are also two of the main ways large institutions transfer your wealth to themselves. Start abiding by these two rules land you can truly profit for life.