An iwas-sunog guide for stock market traders and investors.

by Makoy Velasco, Certified Securities Representative

Ipit? Sunog? These are just a few of the terms that traders use to refer to losing positions. It’s the fire prevention month once again and this should serve as a reminder for traders to be more responsible and careful in trading. Here are some tips to make your stock investment “sunog-proof”.

Always plan your trade. Planning your trade can be as simple as this: knowing at what price to buy and knowing at what price to sell (take profits or minimize losses). A simple buying at support, selling at or near resistance and cutting losses when the support fails can prove to be profitable in the long run. Unfortunately, most traders focus too much on the “at what price to buy” part and overlook the “at what price to sell” part. It’s just like getting inside a building and not knowing where the exits are.

Stock Market Investing

Cut your losses. Cut losses mercilessly because losses will not be merciful to you once they get bigger. Most traders shift from short term to long term once they get stuck in a certain stock. Get rid of the practice of going long term once things go wrong because that is going “wrong term”. When stops are hit, sell. Cutting your losses is living to fight for another day. It’s ok to get out of a burning building with a few burns than being roasted as a whole.

PCA can mean the “Paso” Cost Averaging Strategy. Peso Cost Averaging (PCA) can either make or break you. If you’re buying and holding stocks of very stable and profitable companies for years, then it will probably work (in the long run) but if you buy non-blue chip stocks and have short holding periods, then PCA may work against you. There is no such thing as a “one strategy fits all” for investing, not even PCA. Knowing what PCA really is and knowing when to and not to use it is very important. Why buy more when the prices are dropping? Why not wait for things to get better and start buying? “Paso” is a Bisaya term for getting burned.

Getting burned is too costly. Opportunities are lost as well as time. Make every month a fire prevention month for your investments.

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