Many believe they know how to invest in the stock market, yet over 80% end up losing money.They lack a solid investment strategy. Too often, people treat the market like a game of chance—but it’s not. Losses come from poor preparation, not bad luck.
With the right approach, you can significantly reduce your risk. A proven investment system shifts the odds in your favor, replacing chance with probability. Unlike random outcomes, probability involves patterns and strategy. A system that delivers consistent 70% success rates makes long-term gains far more achievable.
Just last week, we reviewed several high-performing U.S. stocks that showed strong early-year momentum. These weren’t picked by luck—they met key trading criteria backed by tested strategies.
Read More: How to Start Investing in the Santiago Stock Exchange
The guidelines on how to invest in the stock market:
Never invest in a stock without know how to set Stop-Loss
Never invest in a stock without knowing how to set a stop-loss. Even with the best strategies, losses are inevitable. That’s why understanding stop-loss placement is essential—it protects your capital when a trade moves against you. A well-placed stop helps you exit with minimal losses, keeping emotions out of decision-making.
Many investors struggle to apply stop-losses effectively. This article outlines the basics to help you avoid that mistake. Sometimes, you’ll get stopped out, only to see the stock surge days later. That’s normal. Markets often shake out traders before moving higher—just like what happened recently with Airbus.
Do not invest more than 10-15% of your portfolio in a security
Applying a stop-loss doesn’t mean you’ve failed—it means you’re protecting your capital. Still, many traders resist it. You might feel like a loser, especially if you’ve convinced yourself you’re always right. So instead of exiting the trade, you hold onto it, claiming to be a “long-term investor” to justify the loss.
Often, this happens after investing heavily in a stock based on a tip from an analyst—perhaps someone on the radio who called it a “sure thing.” But the trade turns against you, and the loss grows so large that applying the stop feels unbearable. So, you wait another day, hoping it bounces back—and you get stuck.
This mindset is dangerous. If your ego drives your decisions, you risk serious losses. Changing that attitude is essential for long-term success.
Diversifying is the key to investing in the stock market
While related to portfolio allocation, diversification also means avoiding overexposure to the same sector. For example, investing 15% of your portfolio across Santander, BBVA, Bankia, Bankinter, Sabadell, and CaixaBank might seem diverse—but all are part of the banking sector. If that sector dips, your entire investment suffers.
True diversification spreads risk across different industries. Even if the banking sector is currently driving the IBEX, limit your total exposure to it—no more than 15%. Instead, choose the strongest performer with the clearest entry signals. In this case, Bankinter may be the smarter pick.
Do not put all the eggs in the same basket
Think of it like sports betting: instead of putting all your money on one top European team, you spread your bet across six strong teams. If one or two lose, you still have four winners—reducing overall risk and increasing your chances of success.
The same principle applies to investing. Putting everything into one stock or sector increases your exposure and risk. Diversifying across different assets helps protect your portfolio. Like bookmakers, markets are structured in a way where betting on a single outcome often leads to long-term losses. Smart investors spread their risk to stay consistently ahead.
Always invest in bullish values, never in bearish
Now that you understand the importance of diversification and stop-losses, the next question is: How do you invest in the stock market—and in which stocks? The answer is simple: invest in bullish trends. But what defines a bullish trend?
Look for stocks that have been rising steadily—over the past few days, weeks, or even months. The level of risk depends on your comfort zone. Just because a stock has climbed from $0.75 to $2 doesn’t make it bullish if it originally traded at $120. These are typically bearish stocks, often tied to debt, poor management, or negative news cycles.
“The easy money from a bearish rebound is a trap.”
The worst mistake is making quick gains on a bearish stock—it creates the illusion that it’s a winning formula. But over time, this strategy usually leads to major losses. Avoid these stocks, and if you don’t, at least stick to rules #1 (diversify) and #2 (apply stop-losses).
So, which stocks are advisable? The most bullish ones—those consistently hitting new highs. These stocks offer higher probability of continued growth. Don’t fall for the myth that a stock can’t rise just because it’s at all-time highs—just as you wouldn’t assume a $2 stock can’t fall further. Now, you know the mindset behind smart, high-return investing.
Avoid investing money in time frames (LP, MP, CP)
Many investors misuse the term “long-term investment” to justify poor decisions—especially when they skip applying a stop-loss. But if you’re adjusting your strategy just to avoid taking a loss, it’s time for a serious change.
Predicting a stock’s movement over a week is hard enough—trying to forecast it two years ahead is nearly impossible. Your time frame should align with the type of candles you analyze. If you’re using weekly or monthly charts, then your stop-loss or profit-taking actions may take weeks or months. But if you trade with daily candles, holding for months rarely makes sense—unless you’re in a flat, non-volatile stock, which usually isn’t worth the effort.
Avoid investing money based on the news
One of the most common investing mistakes is buying based on news. A stock surges 30% in just days, and suddenly positive headlines follow. That’s when inexperienced investors rush in—right as the stock begins to drop.
Why does it fall? Because smart money—the “sharks”—entered early and are now cashing out, selling their shares at inflated prices to latecomers. This behavior creates the illusion that the news triggered the rally, when in reality, it’s the exit point for professionals.
As the old market saying goes: “Buy the rumor, sell the news.” It holds true time and time again.
The reverse also happens. Take Prosegur, for example. Despite strike announcements and no agreements on December 19, the stock kept rising near record highs. Why? Because the bad news was already priced in, or it was strategically released to create panic.
Avoid news-based investing. Headlines are often timed to serve those who already hold positions. Instead, rely on technical analysis and sound fundamentals. That’s how to invest in the stock market with confidence and consistency.
Frequently Asked Questions
What is the first step to start investing in the stock market?
Begin by educating yourself. Understand basic financial concepts, stock market terms, and different types of investment strategies. Open a brokerage account, define your risk tolerance, and set clear investment goals.
Is investing in the stock market risky?
Yes, all investments carry some risk. However, risk can be managed through diversification, using stop-losses, and following a proven strategy. Avoid emotional decisions and speculative trades.
How much money do I need to start investing?
You can start with as little as $100. Many platforms now offer fractional shares, allowing you to invest in high-value stocks without needing a large capital.
What is a stop-loss, and why is it important?
A stop-loss is a pre-set level where you exit a trade to minimize losses. It’s crucial for risk management and prevents small losses from becoming large ones.
What does it mean to diversify my portfolio?
Diversification means spreading your investments across different sectors, industries, or asset classes to reduce risk. Avoid putting all your money into similar or correlated stocks.
Should I invest based on news?
No. News-based investing often leads to buying at peaks when institutional investors are selling. Instead, rely on technical and fundamental analysis to make informed decisions.
What are bullish and bearish stocks?
Bullish stocks are rising and often reach new highs, backed by strong fundamentals or momentum. Bearish stocks are in decline, often due to debt, poor management, or negative trends.
How do I know when to buy a stock?
Look for bullish signals like upward trends, breakout patterns, or positive earnings reports. Always combine technical analysis with fundamental research.
Can I succeed in the stock market as a beginner?
Yes, with the right mindset, education, and strategy, beginners can succeed. Start small, be patient, and always manage your risk.
What’s the biggest mistake new investors make?
Chasing hype or news without a clear strategy, failing to use stop-losses, and overinvesting in one stock or sector. Success comes from discipline, not luck.
Conclusoin
Investing successfully in the stock market isn’t about luck—it’s about strategy, discipline, and continuous learning. By applying key principles like diversification, using stop-losses, avoiding emotional and news-based decisions, and focusing on bullish, fundamentally strong stocks, you greatly increase your chances of long-term success.
Remember, the stock market rewards preparation, not speculation. Stick to a proven system, manage your risk, and don’t let short-term noise distract you from your long-term goals. If you understand how to invest in the stock market with the right mindset and tools, success becomes not just possible—but probable.