3 Stock Trading Mistakes to Avoid
Stock trading can be an incredibly lucrative career for the educated trader, or a fast way to lose cash for the uneducated. Most traders won’t go into the stock market completely uneducated, but most traders will still make one of several common mistakes that professionals have come to avoid over the years.
Stock Trading Mistake #1: Jumping Schools
Each stock trading school has its own logic and investment techniques. Each method has been proven by the school’s “teacher,” and usually dozens of successful students applying their techniques.
It’s all too common that a new investor “tries on” a school for a short period of time, without truly understanding the school’s principles. They quickly determine that the school of thought “doesn’t work,” and they move on to the next school, repeating the same pattern.
Instead of chasing the latest hot tip, stay consistent with your school of thought. It will pay off over time.
Stock Trading Mistake #2: Listening to the Uneducated
Once you get started as a stock trader, it seems everyone immediately has a piece of advice for you. From the morning radio show host to your bar buddy, advice seems to be all over the place.
Most of the advice you get will be no more than uneducated guesses. Once again, pick a school of investing, and stick to it. Don’t let your buddy’s “hot tip” knock you off course.
Stock Trading Mistake #3: Not Setting Limits
Most systems have some sort of loss stopping mechanism. For example, in Tony Oz’s day trading system, you will never stand to lose more than 3 times what you can gain. If you stand to gain 3 points, if your chosen stock drops 1 point, you’re out.
Other systems have different limits or approaches; the key point is to follow these “to a T.” If you’re pushing your stock “just a little more” in hopes that it will come back up, you’re no longer following a system and investing: You’re gambling.
