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I find that I lose money with the following pattern:

  • I find some stocks. markets go up
  • I buy these stocks and markets to catch up
  • But these stocks and markets go down before I put a stop order
  • Then I will lose money with a loss cut

I am sure that this is a typical amateur trading. How can one make an improvement?

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    "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." -- Will Rogers Commented Dec 8, 2021 at 15:45
  • True. But how do you tell whether the stock is cheap, especially in a current environments? Commented Dec 8, 2021 at 15:51
  • @lemond_2021 you can't know for sure. and it depends on how you define "cheap".
    – D Stanley
    Commented Dec 8, 2021 at 16:28

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You seem to be trying to make money on the stock market by exploiting short-term changes in the value of stocks. This isn't a strategy that works. In general, the price of a stock already reflects the best information available to investors about what it's going to do in the future. The fact that it goes up today isn't correlated with whether it will go up or down tomorrow. On the average, your trades will probably neither lose nor make money, except that you will also have overhead costs such as charges to make the trades, and possible taxes.

The intelligent thing to do is to put money in a low-overhead index fund every month and leave it alone. If your employer offers you a tax-advantaged way to do that, take advantage of that. Historically, this has returned about 8% annually per year.

But how do you tell whether the stock is cheap, especially in a current environments?

You can't. Nobody can.

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  • But it depends on the belief that the market will go up that I am not sure with this valuation and also on the pandemic. Commented Dec 8, 2021 at 16:03
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    @lemond_2021 there have always been high valuations, pandemics, financial crises, housing bubbles, etc. etc. and the US market has always grown over time. I'm not saying that it definitely will continue to go up but if it crashes for good (like Japan) then I've got a lot of other things to worry about rather then my investments. If you don't think it will go up then don't buy it - buy government bonds or other very safe investments (note that gold is not any safer than stocks) and be content with 0.5% returns.
    – D Stanley
    Commented Dec 8, 2021 at 16:16
  • But where does risk management come in this story? Commented Dec 9, 2021 at 18:39

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