Priority No. 1 should be avoiding big losses

Making money in the stock market is as much about avoiding big losses as it is about scoring big gains. Here's why. Say you bought a stock for $100 and ended up selling it for $50, a 50 percent loss. Next, you invest your remaining $50 in another stock. If your new stock goes up 50 percent, you're only up to $75. To get back to even, you'd have to score a 100 percent gain, which is hard to do. That's why avoiding catastrophic losses should be priority No. 1.

Stick with strong stocks. A stock's price action tells you what the market thinks about its outlook. Stocks go up when most players see good times ahead, and down when they don't. It's tempting to think you're smarter than the market -- but you're not. So, stick with uptrending stocks.

Source: Santa Cruz Sentinel

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