Economic recession has cast its glooming shadow on the season of festivities. However, investment options available in the capital markets should not be blamed for the losses incurred by investors. More often than not, retail investors fail to segregate low risk investment options from lucrative options that are more prone to risks. Wise investors regard the following as a fundamental rule of stock market trading-invest only in stocks of organizations you know inside out. You need to understand the business as if you run it. It may sound ironical but it's actually your money that runs the company.

If you think about all the losses suffered by the retail investors, it will clearly show the majority of their losses took place when they plunged into unknown areas like stock options trading because they were not prepared with a solid designing option trading strategy.

If your investments are under water because you barged ahead without an appropriate option trading strategy, the best thing for you to do right now is step back and reevaluate your plan. To panic and cash out of all your investments would be the worst thing you could do as it would turn a paper loss into a real capital loss.

A basic principle of stock market trading implies that whatever stock goes down has to bottom out at a certain level, unless the firm is under severe duress because of financial fraud or manipulative accounting. After this stock hits bottom, its share price will start to appreciate again.

Obviously it will take a while for the stock to recover its value, however waiting through this is better than losing so much of what you initially put in to the investment after so many years. If your portfolio was significantly hit because of the large amount of profit booking done by foreign institutional 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.