Tuesday, 2 July 2013

Your Biggest Risk - The Traps of Trading. What are the 2 most dangerous words in investing?

Professional traders use highly sophisticated trading techniques driven by computer programs that analyze huge volumes of data almost instantly.  You are competing with them when you attempt to play the trading game, and you will probably lose.  Professional traders have a name for amateurs who believe they can win:  "dumb money."  With all of their technology and huge bankrolls behind them, not even all professional traders are successful for an extended period.

MARKET TIMING may be the two most dangerous words in investing, especially when practiced by beginners.  Market timing is the strategy of attempting to predict future price movements through use of various fundamental and technical analysis tools.  At its best, market timing is a risky business for professional investors.

The real danger exists for beginners who are tempted by what looks like easy money.  All you have to do is buy a stock today and sell it tomorrow for a "gut feeling it was going up."  Yes, this happens every once in a while, but somebody has to win the lottery, too (here's a hint:  it won't be you or me).

No comments: