Trading Tips For Moneymakers

The Grandma's Muffin Corporation stock that you recently purchased for $3 a share just hit a high of $27. You begin to jump up and down for about five minutes as you come to realize the huge profit you just made. Now it's time to make a decision. Do you keep the stock and hope it continues to rise, or do you sell the stock and take your profit?

your inner-voice

Let me tell you what you will probably do. The first thought to linger in your mind will be, "Do I get the red Porsche or the black one?" Then you realize that if you're going to buy a new German sports car, you will have to sell the stock and materialize those fine profits of yours.

So you plop back down in front of your computer, log on to your online account and quickly type in the sell order. Then you press "enter" and a confirmation window pops up.

This triggers the little greedy voice inside of you that says, "Wait don't sell. What if the stock continues to rise; you don't want to lose the opportunity to make more money, do you?"

So you hesitate, eventually cancel the order, and do a little more research. You check the charts, read a little more on the message boards and follow the news a little closer. Then, after a moment of reflection, you finally make a big decision, "I'll wait a little longer to see if the stock rises one or two points."

Ten minutes later the stock falls back to $25. You bang your head on the desk. Instead of selling, you wait for the stock to return back to $27 -- the price at which you were originally going to sell.

But the stock drops another ten points to $15 a share and before you know it, you're selling the shares for $5: a 67% profit. Not bad, but you could have done a lot better. Who do you think will get the blame for your greed? The markets of course, they always get the blame.

pigs get slaughtered

Don't blame the market for your bad luck. You are the sole reason for the outcome of your decision-making. The human instinct in all of us is the greatest enemy of the average investor.

There is nothing more human than greed, and as we have seen throughout history, greed kills. It is associated with the behavior of pigs (since they always want more), and we all know what happens to pigs. In the wise words of Jessie Livermore, "Pigs get slaughtered; bulls and bears make money."

So what's the profit-making strategy? Next >>