If you have financial goals that require investing returns higher than market averages you will probably need to dedicate a portion of your portfolio to trading individual stocks. This can be a dangerous activity if you are an uninformed or an uninvolved investor. Let’s look at two stock buying scenarios.

Let’s say you get a hot tip on a stock ready to move higher from watching a panel of “expert” stock pickers on TV. One maven in particular makes a very compelling 5-minute case for buying this stock now. The opportunity sounds too good to pass up so you go online and purchase the stock or you call your broker and have them place the order.

Then you wait and you hope. You check the stock price daily and you get a rush of adrenaline when it goes up. But if it does go up you don't take your profits because you are sure it will continue to go up some more. Greed creeps slowly into your decision making process.

Now the stock starts to decline. But you don’t sell because you are hoping against hope that it will return to previous highs. Even as the stock declines below your original purchase price you do not sell. You are not willing to take a loss or to admit you made a mistake. Fear is now in control.

The stock sits in your portfolio for months or years, sometimes going up, sometimes going down. You do not have a plan to sell it. Your money is tied up. Emotions are in charge. You don't know what to do. What a disaster!

As a graduate of an NAOI Study Course you will never buy a stock based on a tip from a friend, from a relative, from an “expert” on TV or from any third party. You may get ideas from a variety of sources but you never buy until you have performed your own “due diligence” on the stock. All NAOI Study Courses show you how to completely evaluate a stock candidate in minutes using the right Web resources.

Let’s assume you get a stock idea, perform your analysis and find it to be a worthy purchase candidate. As an NAOI course graduate you will next develop a “plan” for the trade. You will decide upfront how much loss you are willing to take if the stock price goes down. You will also decide when to take profits if the price goes up. Then using online tools you implement these decisions by placing a “stop order” below your purchase price to automatically sell if the stock goes down to a predefined level. You will also place an automatic “alert” above the current price that generates an email to you if the price moves up to a predefined level. With just a few minutes of work and the right tools you have implemented a stock trading plan that takes emotions out of the equation! 

Now if the stock price drops to a predefined level it is automatically sold. You have limited your loss and freed up money to invest elsewhere. If the stock price goes up to your profit alert level, you will be automatically notified via email. You can then examine what is happening and either take your profit (never a bad idea) or raise the price level of your stop-loss order to lock in some profit while leaving open the potential for further gains. You can also decide to raise your “profit alert” level.