Principle of investing

As a trader we buy something we think has more value and we sell something we think is less / no value in the future.

Is it that simple?

The reality is NO, when people buy the real estate he hopes that someday the real estate will be worth more than money that he paid .... OK this makes the analogy of investing

OK, then people buy phone, jewelry, computers, motorcycles, whether it includes investing activity? I think yes and no, yes if all were bought for working capital or labor support, but not if this luxurious stuff it was purchased only for fashion or just to keep the image and lifestyle.

In trading this principle also applies. When we took off our dollars and buy shares DOW JONES or when we buy and sell EURO DOLLAR, do we have to think very carefully that the value of the goods we buy are going up? Maybe you think so, said the market reality is not a majority.

Subprime mortgage one of them caused by the housing bubble, the housing prices soared faster than inflation due to the size of mortgage rates and ease of people to buy homes. 2 years ago Americans still buy a house (with a very high price) with the expectation can be sold again 2-3 months later and had to make a profit. At the time of this mechanism occurring nationally then we suffered heavy losses in the national scale. People have a balance sheet crippled due to declining asset values ​​and liquidity also declined because the money has been a decline in value of assets that turned out.

We'll get into things that are technical but important I will try to explain with layman's language.

We return to the principles of investing. Americans violate this principle that suffered losses. At the time of buying a house, they sell dollarnya and buy assets in the form of a house. At the moment house prices are down then that MUST be done by Bernanke and Paulson are also lowering its value DOLLARS with these goals in the losses suffered by the American people are not too severe.

I repeat again

American

Selling DOLLAR

Buying a House

Prices HOUSE DOWN

If the dollar higher then the American people could beggar all but if dollar weakened along with falling prices HOUSE then we can return to a balanced system. I will not discuss this in detail but the point is in our trading value MUST buy something and sell something that is not valuable.Only with this understanding we as private traders can overcome the mental weaknesses that I mentioned earlier.Only by this can we ignore the tricks of the big boys for stealing money from our capital.

Without knowing the VALUE INVESTING of capital goods that we tradingkan then we do not rush to call ourselves the trader first, lest we are a player hit the jackpot.