[msnln]

I have been in stock market for over 16 years and first few years I really stunk at investments. My first investment lost over 50% in matter of few months. After a few stinkers, I started hitting the books and reading up on reading financial statement, portfolio theories, technical analysis.

Over the years, I learned that you can beat the market through studing each company's financial condition and buying at right entry points through the technical analysis. Most people tend to think technicals are scam and do not work and many times they may not work for short term but longer term technicals work well for me. I have had losing trades, but over the last 8 years, I have not had any down year and this includes bear market of 2001-2003.

My first rule is to diversify, sometimes excessively. I typically hold up to 25 different stocks. My second rule is not to lose too much on one position. A friend who is a portfolio manager told me years ago that trading stocks is very simple and there are only four outcomes as result. You can make a lot of money, you can make little money, you can lose little money, or you can lose a lot of money. As long as you can avoid that last outcome, you will make money. Set a loss limit. My third rule is not to get too greedy and know when to say enough profit is enough. I have many winning positions become losing positions because I got too greedy or wanted just a little more profit. When a stock moves up too much to the point where charts cannot show where the resisitance is and starts going down, then it is time to take profits and wait for a better entry points.

Every so often I look at the stocks I hold and ask myself if I would be buying that stock today. If my answer is no, I look to sell that position. Just like anything, stock trading takes practice and patience. You need to learn what works for you and learn it really well. It took me 5 years of down or flat years to learn this but this was before internet and all information was available. With all the information out there, it should take a lot less time now. In any case, now I beat the market averages by 2 - 3X consistently. I was up 25% before the correction earlier this month, but after indices gave back all gains, I am still up 16%. I think this type of return can be achieved by anyone, if they would commit just 1-2 hours daily to learning the market.