12 Lessons for Winning on the Stock Market

I have been trading on the stock market since 1999 and have been actively trading since 2008 on the London Stock Exchange. I am not a professional investor but a more typical personal investor with a day job like the average person. Since 2008, I have made 84 trades, and 75 have been profitable. I have reviewed my strategy constantly and since I settled on my current approach I have completed 13 trades since 2017 and all have been profitable, while my dividend returns have also improved. It’s an approach I have settled on for now, and it has even seen me through safely so far through the current COVID-19 crisis were going through. This article summarises the 12 principles of my current approach to investment in the stock market:

1. Never enter the stock market unless you have surplus funds in hands. You don’t ever want to be in a position where you are in a rush to sell them. Never borrow to invest.
2. Define your Strategy. What do you want to achieve, where are you going to invest, what shares / industry segments are you going to trade it and have a clear definition of what constitutes a successful trade.
3. Know the shares you want to buy, work out the price you are willing to pay for them, ‘stalk’ them every day and let them come down to your price.
4. If anything of significance is going to happen in the stock market, it will happen in the first five minutes of the trading day, be attentive to it at that time. The rest of the day will most likely follow the pattern.
5. You make your money when you buy the share, not when you sell it. Never rush into a buying a share unless it meets all the conditions you have set. It is, far, far less painful to miss buying a share that eventually rose then to be stuck with a hastily bought share that has fallen.
6. Don’t buy a share to sell for a gain. Buy a share you believe you can live with for life, and then look to sell.
7. Never pretend you understand the market or that you can predict its behavior. The market operates in waves that are not determined by you. You just have to learn how to ride them, and build a strategy that allows you the best opportunity to get in at the right time and get out at the right time.
8. It is painful to sell a share for a gain and then seeing it rise further – but learn to live with it. Know that you have beaten the market. You made your decision based on the information you had at a given point in time, and sold in line with your plan. Every time you sell a share for profit, you win.
9. Junk shares have that name for a reason and a they find ways of getting lower than a price you through was rock bottom. Avoid them unless you know better.
10. Buy based on numbers or strategy, never on personal preference. You never get emotional about investments.
11. Know when to get out and cut your losses. Admittedly it is a lesson I am yet to fully learn and accept. It remains a chink in my own tactics, which I admit to. But it is an important loss-prevention measure to consider. You will live to fight another day.
12. Lastly, and very importantly, know your ideal investment and base all your trades on it, or as close as possible to that scenario. My current ideal investment would tick all the following boxes:

• Constituent of the FTSE-100
• Within an industrial segment that focuses products that I consider are ‘essentials of life’
• Growing revenue for the past five years
• Growing profits for the past five years
• Growing dividend for the past five years
• The balance sheet shows growing or stable cash-flows and stable or declining borrowings (Current and Non-Current)
• Dividend yield is 10% at current market price
• The current market price is close to its 52 Week Low
• The market price is low due to overall market conditions rather than issues with the company itself

This article represents my personal opinion and is based on personal experience. I am in no way an expert in these matters and stress that trading is a high-risk business. I would be happy to know your views and thoughts on this, what has worked for you and what hasn’t.