Stock Trading Tools

I'm going to show you a method for winning in the stock market. It's the idiot's approach, the lazy way, the simplest way, ironically, the best way. The first lesson here is the longer you invest, the lower the risk. Suppose you happen to sink your inheritance into the market at the top of one of the peaks, just before a huge dip. The best strategy would have been to just strip yourself to the mast and hold on through the gale. This would have brought you safely to a continuing cadence of escalating profits. You can always win if you just hang on long enough-every single time! Will this trend continue into the future? Who knows? At worst, the market could collapse into a steep decline from which the world will never recover (sounds ridiculous, doesn't it considering all this bloody century has seen and survived?)Maybe the market will take a breather and languish for a decade as it seems to be happening now. But even so, if you give yourself a long enough time frame, the overwhelming odds are that things will eventually improve and keep improving. History has shown that the shorter your investment horizon, the greater your risk. Suppose you got into the market and things started to look bad. Instead of holding for the long run, you got spooked and jumped out after only a year. What would be the odds of your success? From 1954 through 2003, there have been only 14 years in which the overall market (as measured by the S&P 500) lost ground. That's about one losing year for every four winning years. Over three quarters of the years have been winners. What does that tell you? The odds of winning are in your favor. Nonetheless, on a short-term basis, you have about 22% chance of losing all of your-chambered handgun. That's too high a risk to take in the short run.
If you could hold on for five years, you would lower the risk of loss about 15%.There were very few five-year periods in the past half century in which you would have ended up with a net loss. If you hold for 10 years, the risk of loss is less than 1 in 20. The same logic holds true for 15-, 20-, 25-year holding periods. The longer you invest, the lower the risk. In fact a 25-year holding period has been shown to give you a zero risk situation. This post just answered one of the critical questions for the beginning investor who is planning to put some money into the stock market. When should I sell? Sell somewhere between 10 and 25 years from now.
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