Trading stocks is a hobby for many people out there. The reason for this is because people simply like the freedom of trading on their own terms and potentially reaping the benefits of making a profit. Now as we all know, this is not always the case. If making money was easy, everybody would quit their day job and set up a sick trading station from their high rise! We have identified some of the common mistakes we see within trading, especially the penny stock industry. Enjoy the post and feel free to leave a comment!
1. Jumping In Too Early
Many people are guilty of this. Many people hear of somebody that is making good money in the stock market and want to be that guy/girl. They hear of friends or see other people that have a "lambo" from buying stocks and think they can have that same car. There are obviously all sorts of problems with this. Seeing things like exotic cars and lifestyles can change someones mindset in seconds. The reason for this is people value time over everything. Patience is one of the hardest principles to conquer in trading stocks. People don't understand the work that needs to go in before trading stocks with real money. It's a known fact that around 90% of early traders end of losing money. This is because they quickly figure out that money is real and that it's not as simple as everyone states. One way to help abolish this problem is patience. Utilizing platforms that allow you to trade with fake money can be key! Personally we practiced on a platform like this 2 years before trading with real cash. The reason for this is because you test all sorts of strategies and see which ones work best. Keeping track of data with fake money can be very beneficial to everybody before trading with real money. Keeping an excel document with all your fake trades and analyzing them for a year straight can be extremely powerful. It's like anything else in life such as studying for a big exam, taking batting practice before a baseball game. It comes down to the simple principle of "practice makes perfect." There is no get rich quick fix to trading. But if you build your knowledge through strategies like trading in simulated accounts, it can boost your results and confidence in the long run.
2. Fooling Around With Too Much $
This is a problem that can also lead to disaster. When someone starts trading, chances are their first trade they are going balls deep. What we mean by this is all the money in their account is going into one stock play. They think "If I get this right, I will make a ton"! This is a big NO NO, because it's simply not smart. Playing stocks especially penny stocks can be super risky. One minute you are up a ton of money, and 5 minutes later your initial investment can be cut by 40%. This is why many traders should take baby steps. It's also important from a confidence stand point. If a trader loses their initial investment/ whole account balance in one trade, It's hard for them to keep their confidence high. On the other end if they play the trade much more conservatively, maybe they can now afford to lose a trade and learn from their mistakes. This may sound like a simple problem, but it's truly a big one. Greed is a terrible trait, and can lead to disaster. That's why taking a more conservative approach can go a long way.
3. Not Knowing Key Concepts
Education comes first when trading. This may also seem basic, but it's something many people lack. They rather jump into a "hot stock" instead of knowing anything about the company. I bet you this is something you have done multiple times. The reason for this also comes down to GREED. You see someone that is saying "this stock has the biggest potential" but have no idea about the fundamentals on the company. This is no different than a doctor preforming brain surgery without any sort of practice. It's important to study stocks and understand fundamentals such as financials or technical analysis. These all can go super in depth, but that's why we traded with fake money for 2 years like we mentioned above. At the end of the day, the smartest traders will come out on top in our opinion. This is because they can have a competitive edge compared to someone such as "Johnny Jagoff". Start studying technical analysis or fundamental analysis and become familiar with it before risking real money. As you can see from our posts, we focus on technical analysis (charts). This is something we like to think we are knowledgable in. A lot of our posts that are lessons can be a great start! We can't tell you how many times we have seen people promoting stocks and we look at the charts and laugh. This is what a competitive edge is all about. Having that ability to recognize if something is legit or not based off of knowledge. In the long run it can only be beneficial. Yes you may get lucky and throw money into a stock you know nothing about and make money. But how many times can that work? From our experience the risk to reward is just not there in the long run in our opinion.
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