by Jason Ng, Founder, Master ‘O’ Equity

Learn The 4 Main Deadly Reasons Why Share Market Newbies Usually End Up Getting Their Money Wiped Out.

4 Deadly Reasons Why Beginners Lose All Their Money In The Share Market…

1. Don’t know how to choose the right share to buy
2. Don’t know when to bail out of a losing share
3. Don’t know when to take profit on a winning share
4. Don’t Know how to construct a proper portfolio

1. Don’t know how to choose the right share to buy…

How does beginners choose what shares to buy amongst thousands of shares? You might choose to listen to your share broker, or listen to your “experienced” relative, or listen to free “share pick” on the internet…etc… and you will end up losing money.

Because individual share behavior is very complex, only the most professional full time traders have the right technology to make proper share pick decisions. Such experience and technology is simply not available especially to the beginner trader.

2. Don’t know when to bail out of a losing share…

The deadliest killer of beginner traders is not knowing when to get out of a losing share. Too many traders hold on to their shares until it is worth nothing. Most beginners will hold on hoping that the share will stage a rebound because you simply do not have the technology to tell if a share will ever rebound! The only way for a beginner to prevent losing everything is for an expert to tell them when to get out of a trade.

3. Don’t know when to take profit on a winning share…

How many times have you heard stories around you of people who hold on to shares which made them a lot of money until one day, the share turned around on them into a severe loss?

Too many people keep thinking that their winning shares will keep on winning forever and never knew when to take profit… until the shares crashed on them! The problem is again that telling when a share is losing upward momentum is extremely difficult.

4. Don’t know how to construct a proper portfolio…

Do you know that many shares actually move up and down together no matter what? Do you know that there are shares that totally move opposite to each other? Do you know that many shares actually move exactly opposite to the way the market is moving? Do you know that there are shares that do not ever move? Do you know that there are shares that are on the verge of getting delisted?

If you do not know the above, how would you ever be able to intelligently put different shares together so that you can make money? What if you put a share together with a share that moves exactly opposite to it? Would you ever make money?

That is why a lot of people are turning to trading a much more reliable and much more stable instrument; Market Index or Market Index ETF.

Technical analysis is a premier tool for many professional traders. It gives them a lot of information upon which they can base their trading decisions. The days that these tools were only available to the professionals have past. These days everyone who has access to the Internet can use technical analysis and many of the tools that are available to the public these days are more sophisticated than the tools used by professional traders only a decade ago.

“But I’m not technical.” you might say. This would be a true statement for the majority of the population. The word ‘technical’ sometimes frightens people and causes them to stay clear of anything that might seem too difficult for them. There is no doubt that this gives at least a partial explanation why so many private investors don’t use technical analysis in their buying and selling decisions.

When it comes to technical analysis the word ‘technical’ is slightly misleading to the general public. Of course it took a lot of technical market knowledge to put many of the tools and market indicators together, but you don’t really need any technical background to benefit from these tools. You could say that all the hard work has already been done for you. In this respect using technical analysis is a lot like driving a car. Almost everyone can learn how to drive a car. When driving, one of the things you should keep track of is your current speed. Fortunately car manufacturers have equipped their vehicles with a nice little piece of technology that tells us the car’s velocity. Putting that speedometer together took quite a bit of technical knowledge. However, we as drivers don’t have to worry about that because it has been taken care of. We can just look at the display and have the information presented to us. Of course then it’s up to us to interpret the information correctly.

You don’t necessarily have to understand exactly how a market indicator works as long as you can interpret its signals correctly. And that is not always as difficult as it seems. In many cases it may be a bit more complicated than reading the speedometer in your car, but after a while you will find it becomes second nature. These takes practice of course, but let’s face it, so does driving a car.

With the variety of technical indicators and the large amount of technical terms it’s easy to get overwhelmed. The best way to prevent this is to keep it simple and start small. A smart way to get better acquainted with technical analysis is to take a fairly simple indicator, for example a 50 day simple moving average. The second step is to start looking at different charts using only this one indicator. Not just two or three charts or ten. Start by going through at least a couple dozen charts. As you go through these charts you will start to notice certain patterns. Pattern recognition is something we as human beings are quite good at. We react to patterns in almost everything we do. Our brains are trained to recognize different patterns. When studying charts patterns are exactly what we are looking for. Once we start to recognize these patterns we can start assigning meaning to them. Some patterns clearly indicate that the market is bullish while others are typical for bearish market conditions. Of course this will not allow you to predict the markets but it will enable you to assess probability of certain outcomes. And this in turn will help you make better trading decisions.

If you are not using technical analysis yet you may find that it is a valuable tool to help you make the right trading decisions. And if you are already using various indicators you know that there is always room for refinement.

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