The economic recession has put a gloomy shadow over the season of festivity. But investment options in capital markets can't be blamed for losses incurred by investors. Frequently, retail investors don't segregate the low risk investment options from the more lucrative options which are more likely to be risky. Smart investors consider the following a basic rule of stock market trading - invest only in the stocks of those companies which you know inside and out. You must know the business as well as if you were the one running it. It might seem ironic, but it is truly your money which runs that company.

An analysis of the losses suffered by retail investors reveals that investors suffered the greatest losses when advancing into unknown territories. This occurs when investors explore areas such as stock options trading without designing a well-thought-out option trading strategy. It's no wonder that those who do not prepare a well designed strategy fail to make money in stock market trading, is it?

If you, as an investor, experienced losses because you didn't have a firm option trading strategy going in, the best thing for you to do now is to pause and reorganize your plan of action. Don't be frightened and take your remaining invested capital out because that would convert your estimated losses into irretrievable actual loss.

One fundamental principle of stock market trading is that stocks will hit a bottom. Over time, they will hit an all time low at a particular price level, but eventually appreciate again in value. However, fundamental factors like financial fraud or manipulative accounting can break this principle. When a company goes under, the stock may never recover its share price.

Naturally a lot of time will be needed in order for the stock's recovery to occur, however even having to wait for that to occur is preferable to settling for less than your initial investment all these years later. If you suffered a blow to your portfolio resulting from big outflow of funds caused by huge profit booking by foreign investors, don't even think about trying to time the market.

When you are trading in the stock market, it is wise to only invest in stocks of companies that are leaders in their areas. These kind of stocks recover quicker when compared to stocks of companies that are not industry leaders.