It works something like this: "Stock Broker," Ira Foghorn, a complete stranger to you, phones and tells you to watch Blowhard Networks on NASDAQ. Its stock is going to go up. You do. It does. A few weeks later he calls again and tells you to watch Simpleton Industries. Its stock is going to tank. Again you watch. It drops, just as he'd said it would. Another few weeks later, guess what? He calls a third time to tell you that Consolidated Bread's shares will rise. Very curious now, you repeat your observance. And, of course, once more, this mystic is proven to be correct.

How did he do it?

Simple! You were one of eighty people, whose names he'd gathered from the internet, phone book, a directory, or other list. His second call was to the remaining forty, those to whom he'd proved himself correct. By the time he calls the third time, his list is down to twenty. You were one of the remaining twenty.

The word "con," as in con man, is derived from the word, confidence And, I think you will agree that, based upon abbreviated face-time performance only, "Stock Broker," Ira Foghorn, has "performed," thus generating confidence.

In today's unreal, alternative universe, smoke and mirrors magic proliferate. In this setting it is most tempting to accept the infamous "free lunch," Now, Ira's suggestion that for a small up-front fee he will put you into Suckers, International, so that you, too, can share in the benefits of his omnipotence, sounds enticing indeed. (After all, lunch is always free, isn't it.)

If you bite, any further conversations with this flim-flam man will only get you a reaction akin to the fast-talking physician checking his watch as he mentally consigns you to his scrap heap of victims. To him, the surgery on your wallet is over. Successfully. Now it's time to brush you off, and get on to the next "mark."

Trading seems like it should be easy. A couple of mouse clicks here and there. Buy low, sell high. Pick a stock, buy it, wait for it to go up and sell. Easy, right?

But somehow, spectacular, consistent success eludes you. What gives? What is especially confounding is that it always seems crystal clear what you should have done when you look back.

Welcome to “hindsight bias.” There are many factors that separate successful traders from those who consistently trash their trading account. One of the most important of these factors is that successful traders learn from the past without judging themselves too harshly for their “mistakes.”

Let’s examine this notion of a trading “mistake” for a moment. At the moment you made a “bad” trade, you used the best information you had available to you at that time and took the trading action you did. You had to weigh a number of factors, some of which may have conflicted with each other. If that description does not describe your trading process, you have no business trading.

So why do bad things happen to good trades? The answer is simple: Because they can. You are in the perilous business of guessing the future. Trading is all about risk… and reward. Manage your risks and the rewards take care of themselves.

The human brain is constructed to do certain things well. There are other things it does not do well -- like comprehending the world of probability and odds. The brain likes to have clearly defined “yes” and “no” situations. Fuzzy “maybes” easily lead to confused decisions. This is what happens way too frequently when you trade.

This chronic, nagging confusion resulting from weighing vague and conflicting information sets you up to second guess yourself. You ask yourself, “Why didn’t I see that (at the time)?”

Be kind to yourself. You are trying to do something that is extremely unnatural to the working of your brain. You are trying to make decisions when the information available is incomplete and contradictory.

Warning: if this is not how you experience the trading decision process then it is likely you are setting yourself up for a fall. Doubt and confusion are a natural, even necessary part of the trading decision process. Confident certainty usually means you are missing something… either that, or you are working with inside information.

I repeat: Be kind to yourself. You will make mistakes. You cannot separate out the good decisions from the bad until after the fact. That is the nature of trading.

Harsh second guessing can cut your trading career short before it really starts. Don’t let yourself fall for this trap.

Did you recently have a losing trade that upset you? Or, at least, it would have upset you if you let it? Be careful, you may be setting yourself up for making rash trading decisions.

It’s only human nature to try to “make right” a “mistake.” I have put these terms in quotes because they are subjective judgment calls. “Mistakes” are trades that, in hindsight, did not work out. The trading market does not care whether you’re upset with how your trading has been going lately. But it will gladly take your money if you trade recklessly or with desperation.

The market does not care whether you are on a winning streak or losing streak. But it will take advantage of a hurriedly placed trade on which you may not have done your usual due diligence. You should have a well developed procedure for selecting your stock pick or other trading vehicle.

Perhaps you’ve noticed that sometimes you are anxiously looking for a stock pick you can use to “win back” a recent loss. In fact, you may be trying harder than usual to find your next trade. You may even find that you are trying to “force” a trade. This can be very dangerous and could lead to a death spiral of ill conceived trades.

The market is a harsh mistress, and you may become confused because sometimes these revenge trades just happen to work out. Then you come to expect that your forced trades will always work out. But the market is just setting you up for a fall. Sooner or later, you take a revenge trade and then become “married” to having it succeed. You hold on, and hold on, bleeding cash and peace of mind the whole way down.

How do you avoid getting trapped by the “revenge trading” mindset? The first part is to train yourself to be in touch with the emotional experience your trading provides. If you notice yourself getting anxious about putting on another trade, STOP! Call a time out. Catch your breath. DON’T enter into a new trade. Also, be careful about not compromising on your stop losses on existing trades.

The key here is self awareness and discipline. Nobody but you will know if you are contemplating an ill conceived trade. But sooner or later, you will pay the price of sloppy trade selection. There will always be another stock pick, at least until you lose your account in an undisciplined orgy of revenge.

So don’t become a victim of your desire to reverse a losing streak by forcing trades. Just say “no” to revenge trading.

Learning how to make a fortune in the stock market is something that anyone can do as long as you have the correct foundation. Here are the seven stock market fortune rules that are the core principles of a very profitable trading system called phase trading.

Stock Market Fortune Fact: 75% - 80% of all stocks move in the overall direction of the market.

With most stocks following the overall market direction, why don't you let the market make you money? The easiest way to make a fortune in the stock market would then be to only trade with the long-term direction of the stock market. Don't try to fight the market, but let the market help you make you money.

Stock Market Fortune Rule #1 - Make faster and larger profits by investing with the market in both bull and bear markets. If you are not utilizing bear market to make additional profits it's like leaving money on the table.

Stock Market Fortune Rule #2 - Fully utilize the power of compounding to enhance your gains exponentially. You won't see the benefit on a single trade, but add up multiple profitable trades and you will start to see the power. Even Albert Einstein called the principle of compounding interest the “Eighth wonder of the world”.

Stock Market Fortune Rule #3 - Invests only in stocks that have the largest potential for huge gains. Stick with high volume stocks that move in phases for the safest and largest profits.

Stock Market Fortune Rule #4 - Eliminate emotional buying and selling of stocks. This leads to buying and selling too early or too late, which is the biggest reason why people lose big in the stock market.

Stock Market Fortune Rule #5 - Don't over diversify your portfolio. This is one of the biggest mistakes that people do without realizing the harm that it causes. Your portfolio diversity should be based on risk vs. reward not just a pure number of stocks you want to have. Would you like to trade only the best super high performing stocks if for every $1.00 lost you would gain $4.00?

Stock Market Fortune Rule #6 - Let your winners run. This is the golden rule of successful investing. You might not think it, but it is the hardest part emotionally to follow. It’s very easy to see a stock move up nicely. On the other side of the coin, how bad it feels when a stock takes a short-term stumble. Not fully knowing it will come back up or not. This is when it gets very difficult to keep your faith in a stock. If you sell now you could be missing an even bigger run right around the corner.

Stock Market Fortune Rule #7 – Sell your losers and don't dwell on them. As long as you are following your system and didn't let your emotions take over. Remember that no system is 100% correct all the time. Keep focused on the longer-term success of a system rather than individual trades.

If you precisely follow these seven stock market rules you can successfully eliminate the majority of the most common mistakes that traders make. With this information you should be on your way to making a fortune in the stock market.

I have been trading stocks now for over ten years and have never used a stop-loss order. There are several opinions as to whether you should use a stop-loss order or not but it comes down to your personal preference and trading style. If you are the type of trader or stock investor that takes long positions it really doesn’t matter just as long as you have quality companies in your portfolio.

During my years trading stocks I have set-up several accounts where I only paper trade to try out new techniques. The dummy portfolios range from tech stocks to under three dollar stocks. I also have dummy portfolios set-up for the various sectors that include the ETF’s for those sectors along with stocks of the most prominent companies in the sector.

The dummy portfolios where I have lost the most “money” is the three dollar and under stocks. It seems that the smallest companies where you could really make some money if they took off provide you with an opportunity to lose the most also. The stocks may seem cheap but if you look deep into the fundamentals of the company you will see that they aren’t really cheap at all. They just appear cheap because the stock is only three dollars. For someone who wants to trade those cheap stocks a stop-loss order would probably benefit you because if the economy itself doesn’t cause the prices of the cheap stock to go down the company usually has a secondary offering to raise cash that drives the stock lower.

If you are trading large high-quality companies you could actually be worse off from using a stop-loss. Let’s say that you had a hundred shares of XYZ company that you paid thirty three dollars per share for and you place a stop loss order to exit the trade if the price drops to thirty two dollars. Ok, so you are two days into owning your one hundred shares of XYZ corporation at thirty three dollars and it has already gone up five percent so you are making money on it then out of no where comes a newsflash that a terrorist may have a bomb in a key government building and a bomb squad is on the way..etc. Once the news hits the airwaves the stock market takes a big tumble and your shares of XYZ company drop to thirty-one dollars for one second and your stop-loss order is executed. One hour later the news comes back on and says that the terrorist threat was a hoax it was only someone working on the elevators in the building that scared someone into calling 911.

Three hours after you were taken out of your trade the price of XYZ shares go to thirty four dollars per share and continues climbing due to good news that the company just announced about a new product it is bringing to the marketplace. In that example you were whipsawed out of your position and turned what would have been a winning trade into a loser. In those cases instead of using a stop loss it would have been better to buy more shares of XYZ company as they went on sale if only briefly.

If you have a really profitable position in a stock and you are concerned about the recent quarters earnings report you may be better off just selling your position, but the next best thing in that case would be a stop-loss order to preserve some of your profits should the earnings news come out bad.