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The holiday season has been darkened by the gloom of the economic recession. But don't blame the investment options themselves for the mistakes made by traders. It is usually the case that small investors don't realize the difference between low risk options which limit the ups and downs and high risk options which can make or lose a lot of money. Smart investors will become very familiar with the equities they choose to follow in their stock market trading. They strive to understand the business like it was their own. And it is their own if they own equity in it.

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 incurred losses just because you're an investor who happened to invest without having formulated a solid option trading strategy, at this point, the best tip for you is to stop, regroup, and reformulate the game plan. Don't panic and withdraw the remains of your invested capital, since this would only transform notional losses into irreversible real losses.

A fundamental principle of stock market trading suggests that whatever stock goes down must bottom at a particular level unless the company is under great duress due to manipulative accounting or financial fraud. After the stock bottoms out, the share price will start appreciating again.

After a stock has taken a big hit it may take a long time for it to get back to where it was, but it is better to wait for the long climb back then it is to wait for years only to get back less than you put in. If your stocks are already way down due to profit taking by foreign or institutional investors, then it is already too late for you to time the market and join them.

It is a general practice, when stock market trading, to invest in well established businesses who are leaders in their industries. These stocks have a history of faster recovery when the stock market falls than companies who are not segment leaders.

During this difficult market, smart investors will become very familiar with the equities (that is, stocks) that they choose to follow and engage in stock market trading. This is also true for equity derivatives. You should be very familiar with your stocks if you engage in stock options trading, and make sure that you have a planned out option trading strategy. One principle of stock trading is to stick to blue chip, established companies. Another is to buy in at the bottom of a market and to never sell at the bottom of a market.