There is money to be made in trading stocks and there are solid approaches that a trader can use. Unfortunately too many traders lose money repeatedly from same mistakes. Here are some thoughts from Forbes about stock trading mistakes to avoid.
First of all make sure that you are entering the ticker symbol for the stock that you want. Too many people bought Tweeter instead of Twitter at its IPO. And, always, remember that stock trading is not a trip to the casino in which you keep doubling your bet in hopes of that giant payoff to get you out of debt. Too many trading mistakes are self-inflicted and come from not treating the trading of stocks as the business that it is. Here are three specific suggestions from Forbes about trading mistakes.
Waiting for the perfect moment to begin: Investors who heeded the market doomsday predictions for 2016 and stayed out of or fled the market missed out on the S&P 500 index’s 9.5% increase for the year. Time in the market, not market timing, is an investor’s best friend. With a long-term time horizon you have the ability to ride out the market’s short-term ups and downs. Similarly, don’t be psyched out of buying stocks because of your brokerage account balance. The same rules apply whether you have $500, $5,000 or $50,000 to invest.
Shopping for ticker symbols instead of businesses: It’s easy to forget that behind the blinking red and green three- and four-letter combinations are actual companies with bosses, balance sheets, break rooms and business goals. Approaching stock picking with the mindset of a business buyer helps you focus on the characteristics that make a company worthy of a place in your portfolio.
Forgoing a prenup: “What do you hope to get out of this long term?” may sound like an online dating question. But carefully crafting an answer may prevent you from making most of the stock trading mistakes on this list.
A wise old man of my acquaintance once told me that there is no problem in life that cannot be solved in a quiet room with paper and pencil. In today’s day and age you can say computer but the point is the same. Before buying or selling a stock write down what role that stock plays in your portfolio, what you expect or expected of it, what you like or don’t like about the company and you time horizon and criteria for buying, holding and selling.
On our sister site, Profitable Investing Tips we wrote long ago about how to start investing in stocks. The same advice applies to trading.
How to start investing in the stock market is to start with basic principles. How much do you have to invest? A good rule of thumb is that you should not invest what you cannot afford to lose. Thus you need to be able to pay your mortgage or your rent and make payments on your car and other expenses. Then you should have a couple of months of expenses in the bank and your credit cards paid off. That is how to start investing in the stock market. While you are getting things in order you will need to decide if you are investing for the long term such as retirement or you child’s college education or for a short term of a few months or a year.
Don’t trade what you cannot afford to lose and when you have made money in stocks take a little off the table because you do not have a gain until you have taken a gain.
Stock Trading Mistakes to Avoid PPT
