Every now and then, we hear some juicy news about a certain company making huge profits or about to liquidate, that is filing for bankruptcy. These juicy information can be found anywhere on line, from forums, chatting channels to the occasional spam emails we receive ...etc While in the reality world, such news are also available in wet markets where housewives flock to, to casual gossips between people at food centers and even a simple conversation between you and the cab driver. The question is, how accurate are these hot tips? Are they reliable? Should i invest now in case i miss out on making huge potential returns to my portfolio? Well, there is no definite right or wrong answer to them. Why?
Always remember this and you will be doing yourself a huge favor. "There are always two sides to a coin." This applies to everything including hot tips we are discussing here. Hot tips can be your key to making a lot of money but they also have the potential for huge losses. The general rule here is to not give nor listen to tips. If you allow hot tips to become part of your trading methods, chances are it will cost you more capital losses maybe not now but in the near future. You might start to believe in what others are saying and start to ignore what is already in your trading plan. This is especially so when the first few trades you made money in, came from hot tip sources and not your own research. That might actually cause a huge ego boost and you actually start to believe that research on your part is not necessary since hot tips are available and accessible easily. This false belief will definitely cause you huge losses in the long run.
Here's what may happen when we open a position base on a hot tip. A trap that we could easily fall into can occur when your position starts to move against you. Even with a trading plan, you will be inclined to break all rules and not cut your losses because of the so called "reliable" information you have heard somewhere about the security's future. Have confidence in your own trading approach and not worry about these hot tips of any nature regardless of their sources. Tips have always been considered disastrous, so there is no reason to think that they are different today. Confident traders remain rational and rely on their own methodology and stay unaffected by others say.
What about you giving tips away? When the position turns against you, it is possible to feel some obligation to stay in the trade because of the relationship you have with the person you gave the tip to. We can all imagine the embarrassment to face up to that person after the position was entered and tell them that the tip was no good and they should exit.
Have faith, trust and confidence in your own methodology. Continue to learn and improve your trading techniques. The best is to remain quiet!