Common Trading Mistakes

[czrxijgly]

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.

[Deidre07C8]

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".

[DNegeedity]

Money Management - Don't put all your eggs in one basket. Don't invest more in the market than you are willing to lose. Never invest money that you need to pay bills with.
Affinity - Don't become too attached to a particular stock or company. All stocks go through cycles of strength and weakness.

[Dunycenoma]

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

[elireyebojezu]

Avoid Non-Liquid Markets - Don't buy stocks in a market with very low volume. You may not be able to sell your stock when you need to.
Over-Trading - Don't take trades just because you feel like you are missing out. Loss of opportunity is preferred to loss of capital.