Cramers's 4th Commandment of Trading.

Cigarettes have gotten expensive.  Don't burn your money with bad trades!

Jim Cramer's 4th commandment of trading is:  'Never turn a trading gain into an investment loss.'.  Don't over stay your welcome in a trade.  Remember trades are different from investments.  The whole point of a trade is that it has a catalyst.  Once the catalyst has taken place and the stock reacts to the upside or the down side it is time to take profits or minimize losses. 

Sitting in the stock because it has a great reaction to a catalyst can lead to over staying your welcome and eventually the stock can end up losing you money.  If you are trading stick to your plan, take profits or minimize loses.  Do not fall in love with the stock you trade and end up over staying your welcome by making a winning trade into a losing investment!

Cramer's 3rd Commandment of Trading

Jim Cramer's 3rd commandment of trading is:  'It is okay to take a loss when you already have one.'   Apparently some traders believe that when they take a loss it doesn't really count as a loss until they sell the stocks they traded into.  Although this seems like a simple problem to avoid, it does go back to the old rule of not falling in love with your trades/stocks/investments. 

If your taking a loss on a trade that you have made and you keep making excuses for why you need to stay in the stock it is definitely time to head for the exits!  If you feel like you have a strong reason to stay and truely believe the stock will turn around then you should explain the situation to another investor, or even just a friend.  If your explanation doesn't make sense to the third party GET OUT OF THE STOCK!  Staying in bad trades because you want to believe that you didn't make a mistake is a sure fire way to lose tons of money!

Read or listen to company conference calls

Hard at work

I have spent today reading conference calls for three of the stocks that I follow.  Although reading conference calls is not the most entertaining thing to do it is absolutely esseintial for stock traders and investors.  There is also an option to listen to company conference calls when they report their quarterly earnings but I like to read the transcripts.  You should read or listen to every quarterly conference call for every stock that you are currently holding or plan to trade.

The information in the conference call will include some general talk by the company officers followed by a question and answer session where analysts who follow the stock ask questions to the finacial officers. 

The conference calls are full of essential information about the companies well being, plans for the future and they can also provide valuable information about the specific sector a company is in and even the shape of the U.S. or global economy.  Some of the lingo and terms used in conference calls can be hard to understand.  Don't hesitate to look words and terms that you do not understand up so that you can gain a better understanding of what the company leadership and analysts are referring to.

The best place to find transcripts of conference calls on the internet in my opinion is, http://seekingalpha.com/.  Once on Seeking Alpha enter in a stock symbol and go to the quote page.  On the left hand side of the page you will see, 'Business Intelligence' and 'Transcripts' beneath that.  Click on transcripts for a transcript of the company conference call that you wish to read. 

Although reading conference calls is a bit daunting at first, it is essential for being a successful investor, will lead you to better returns, and you will find that you get better at analyzing the calls as you read more of them.

DRIP

DRIPS can make your $ overflow!

 
What the heck is a DRIP!?!  In investing a DRIP is not a problem like a leaky faucet it is.  A DRIP stands for 'dividend reinvestment plan', and is defined as:  A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date. 

This type of plan lets you take the money that you make from your dividend payments and reinvest it in to more stock.  Most good companies who offer dividends will offer a DRIP program and you should be able to sign up for a DRIP through your brokerage.  A DRIP will allow you to buy more stock automatically and build your position with your dividend payments automatically.  How maddening would it be, for example if you received a dividend payment for $11.22 for one quarter?  It is much better to use a DRIP and have the money automatically reinvested in the stock when you are trying to build a position. 

If you are an income investor who relies on your dividend payments to pay bills and you have a substantial position in a stock then obviously DRIPs aren't for you!  If you are a savvy investor who is trying to build a strong position in high quality dividend yielding stocks, make sure that you incorporate DRIP.