Common Trading Mistakes
ere is a list of common mistakes to avoid when you begin trading:
- Lack of Education - If you are here, it is a good start. Many people start trading with no idea of what they are doing. A doctor doesn't perform surgery without an in-depth education. The same should apply to any field.
- Profits - Take profits when there are signs of a reversal. Let the winners run!
- Stop Loss - Cut losses quickly and learn to lose right. Don't turn a bad trade into an "investment". It is important to identify where you are going to get out when things go wrong BEFORE you enter a trade. Losing your hard earned capital by holding on to a bad trade can become a nightmare.
Great advice! I couldn't agree more.
One thing I'd add:
BUYING AFTER THE RUN - Just because a stock has run up doesn't mean it will go higher. This is a very common mistake - "buying at the top".
For me, the best stocks have been those that have bottomed out due to some fundamental issue. For example, the BP gulf spill. It took their stock in less than half. Currently I'm sitting on LINE, who's stock was also nearly halved after an accounting issue. These are big, billion dollar companies....neither of them will go out of business....both of them pay dividends so you get paid to wait for the stocks to recover.
http://www.stockmarketcats.com/images/smilies/smile.gif