I keep on losing money on the stock market what can i do?

I've been investing a lot of time learning about the stock market. I've done research on fundamental analysis and technical analysis and have knowledge of money management. Unfortunately I keep on losing money on the stock market despite all this knowledge. Is there anyway to stop losing money on the internet? I know I wont win every time but I just want to win more than I lose.

Everyone loses money on the stock market at one time or another. Your goal might be to increase your capital or to make an income from your investments, whatever your financial goals may be if you know how to never lose money in the stock market then you will be a step closer to your financial dreams and aspirations.

The first rule is to only use money you can afford to lose, I know this title says how to never lose however the stock market is very unpredictable and even with the best of systems you can sometimes make a loss to. If you only invest money in the long term you will see that the stock market outperforms any other investment vehicle, you just have to be patient and persevere.

Research is king when it comes to trading in the stock market trading, the more quality research you do the more likely you are able to find companies that are profitable and make a good return. Your research should start on the economy as a whole and then you should zoom into the individual sectors to find the best sectors and the worst sectors. Now that you have determined the worst sectors you can find the weakest companies using fundamental analysis and you can find the best companies from the best sectors using the same analysis.

Once you have found the weakest and strongest stocks you can structure your trades so that if you think the markets will decline you will short two weak companies and long one strong company as a hedge. If you think the markets will raise then you can long two strong companies and short one weak company as a hedge. By using a hedge you can protect any major losses and still profit significantly.

Another strategy that you can use so that you don’t lose money is to use stop losses. Many brokers that provide good service usually offer a stop loss facility. It is absolutely imperative that once you place your trades you know where to take your profit and where to cut your losses. If there is a point of no return on your stock then this should be your stop loss, it should typically be 5% under your opening price and once it is breached you should cut your losses and go to the next trade. If you become emotionally attached to your trades just hoping that you will be proven right then you are in the wrong business.

If you want to survive in the stock market then you not only need to know how to make money you also need to know how to minimize your losses. If you can let your profits run higher and higher and your losses run lower and lower then you will definitely end up with profit in the long run. You need to ensure that your risk reward is always greater than 3:1, this means that you can potentially make 3 times more than what you can lose! Even if you have less winning trades if you adhere to the 3:1 risk reward strategy you will still make money.

If you've been losing money on the stock market you need to master the fundamentals and understand long and short positions. Did you know that you can make money when the markets rise however nowadays with more financial instruments such as options, Forex and contracts for difference you can make money when the market goes down really quickly. Markets go down quicker than they go up and so you make money even quicker when it comes to equity dealing in the stock market.

If you can identify all the places where the markets will rise and fall and set your positions accordingly then you can make a significant amount of money. If you know how to make money when the stock market is falling you will be able to make money in bullish and bearish markets.

Know Short and Long Positions

A long position is when you are bullish of a stock or commodity and think it will rise quickly, you can buy shares in the company of you can buy contracts for differences (CFD’s). When buying normal shares you have to pay for the whole amount and you will only make money when the stock market like DOW FTSE rise. With contracts for difference, options, Forex and spread betting you can choose the direction the stock will go and only pay 10% of the proceeds. This is called margin and you can make explosive profits using this concept, be careful because if the equity or stock goes in the wrong direction you will make explosive losses. If you know how to make money when the stock market is falling then you avoid the pit falls.

Have Stop Loss and Take Profits for Money Management

When you think the market is going rise you can place a long position using CFD’s. When you think the market is going to fall sharply you can place a short position using CFD’s. To create a short position you effectively borrowing the stock and then sell it back in the hope of buying it back at a cheaper price in the future making money on the difference using only 10% margin. If the stock falls sharply then you make money and if it rises you can lose money, with Contracts for Difference you can end up losing more than your initial outlay is the market goes against you. This is why you need an effective strategy in place with risk management. It is essential to have guaranteed stop losses and take profits in place. People who know how to make money when the stock market is falling use these strategies.

Have A Strategy and Back Test The Strategy Using Metastock

If you expect the market to fall sharply in the future and you do not want to sell all your equity because of all the administrative costs in terms of commission then you can place a short position on a fundamentally weak stock to hedge or mitigate the risk of falling markets. Lets say you have $10,000 in shares in different companies and expect the markets will go for a correction and fall sharply then selling this amount of shares would incur commission costs, if you think the long term trend is bullish then this would be a waste of money.

What you can do instead is place a short position on a really weak stock for about $100, if you use CFD’s then you only need to pay $10 which is an absolute bargain; think of it as insuring your positions with and insurance policy. When the markets fall you will lose out on your shares however you will gain on the weak stock which should fall significantly because it is weak. This is a great way to hedge and make money when the stock market goes down. It is essential to hedge if you want to know how to make money when the stock market is falling.

Never Be Emotional and Always Have Exit and Entry Points That Are Predetermined

If you don’t have a portfolio of equities and you have reason to believe that the markets will fall then you can place 3 short positions on really fundamentally weak companies. The reason behind choosing a weak company is that when the markets fall these companies will fall more than stronger companies which will weather the storm. Make sure you hedge the position; this means having an insurance policy in place with a long position on a Strong company.

So if the markets do fall then the strong company will not fall that much however if you have made a mistake and the market rises then the weak companies will rise a little and your long position will recoup any loss you are making. This is a great hedging strategy that many people use to avoid massive losses in their portfolio and have made explosive gains. Using this strategy and knowing how to make money when the stock market is falling is a great recipe for success.

Only Invest Money You Are Prepared to Lose

Whatever instruments you decide to use you have to be aware hat 90% of the stock market participants lose so you have to have a good strategy, money management and effective stop losses and take profits in place. If you want to be part of the 10% that win then you have to educate yourself and really use reason instead of emotion to make decisions. Stockcharts.com is a great place to start your research.

Always virtual trade before you start trading for real and always manage your money properly so that you only use what you can afford to lose. With a little education and practice you too can invest in the stock market and make money when the markets go down. I would also recommend Metastock to back test your strategy. How to make money when the stock market is falling is a great way of generating extra cash, remember to be careful.