The question of “how to make money in the stock market” is one that is asked by every new and experienced investor. Most investors look to Wall Street for how to make money in the stock market, but Wall Street makes money from investors’ transactions making their opinion biased towards buying stocks. It is hard for a Wall Street firm to suggest selling stocks when it would mean the end of their business.
So with the stock market professionals, Wall Street, biased in their advice, where does this leave us? We must rely on ourselves for investment decisions. We should always take into consideration the suggestions of our financial advisors, but ultimately we must be responsible for the investments me make.
I find it unsettling how some people invest their hard earned money blindly off random tips and hearsay. Investing in the stock market is like driving, we should have to pass a test before investing in it. Since it is not a requirement to take a test to invest in the stock market, we should take it upon ourselves to understand its inner workings before we put one dollar to work in it.
Once we understand how the stock market works and the risks associated with it then we can finally start to make intelligent decisions. No matter our level of experience in the market we should all start with the basics. Before I took my series 7 securities exam (I am no longer licensed though since I am no longer a stock broker), more years ago then I would like to admit, I thought I already knew mostly everything, but to my surprise at the time the stock market had much more moving parts then I ever thought.
Once we understand how it works, mechanically speaking, then we need to establish our strategy, why are we buying and when are we selling. Our strategy has to be something we understand and does not involve our emotions. Emotions and the stock market equal losses. Human beings are not emotionally wired to make money in the stock market. When our emotions make the decisions in the stock market we will almost always buy at the highs and sell at the lows. A good investing strategy is an objective method of why we are buying and when we are selling stocks.
Webster’s Miriam Dictionary defines objective as:
Expressing or dealing with facts or conditions as perceived without distortion by personal feelings, prejudices, or interpretation.
From the above definition we can see how we can’t be objective with emotions or Wall Street. To have an objective strategy, we need to find a method that we agree with and deals with facts and or conditions without considering any type of prejudice or personal feelings and is not open to interpretation.
“The Art of Expectations” was the result of my personal solution to how to make money in the stock market. It reveals the Expectations Indicator that has proved relatively reliable in signaling why to buy and when to sell. But as discussed already in this article, it is up to us to formulate our own objective strategy, which we agree with which may or may not include the Expectations Indicator.
So to answer the question, “how to make money in the stock market?” it starts with us.