You are reading a comprehensive guide on how to become an unsuccessful trader and an unhappy person using the stock market as a tool. This guide was created by experienced traders who have rich experience in losing their money by trading stocks.
Mostly these cases are more applicable to new inexperienced micro investors that came to the stock market without even high-level analytics and strategy.
Rule #1: jump into the stock market on hype. What does that mean? Right after COVID (do you remember when was that btw?) a lot of people around, your friends and colleagues were talking about the unbelievable profits they`ve made by trading stocks. Whatever stock they`ve bought then – after a couple of days-weeks maximum they sold it and made their profit. I`m sure – you`ve heard these stories as well. And after that you`ve asked yourself – why are you still not there, why are you still not a trader? So, the following scenario is quite straightforward – you invest your first $100 and let`s assume you`re lucky enough to make a $20-30 profit. Logical question – by investing 10K I`ll make 2-3K easily, done – you depositing 10K but then something went wrong…
Rule #2: attempting to follow the market trend and make money on every price change. You don’t know how to play long (friends don’t say anything about that because none of them have been on a market long enough to know). So, you decided to make money using every opportunity – when the stock price is growing or when the price is going down. I hope that you know what is the cost of each deal for you and that your deals are big enough to bear this cost. So, you carefully track the trend and fix every minimal result of price change during one session. In most cases this will result in a situation when you are one step behind the market – you are buying on highs and selling on lows by trying to predict short price change. End up your day with negative P&L, and after a few days – you are done with investments.
Rule #3: trade for the amount of money that is critical for you. You can ask – am I stupid enough to do so? For sure no, but are you familiar with a `catch of positive trend`? I will explain what that means – you`ve invested your first $100, and you made your first profit. But at the same time, you`ve been tracking a list of stocks that cost more than you can afford to buy for your initial amount. You are fine with that for now. After some time and a sequence of successful deals you believe in yourself and decided to raise a bar to be able finally to make real money, why not? Last three months let`s say you prove your concept and it works, so the time is now! You are adding critical amount (let`s say 10K which you`ve been collecting to upgrade your car) and you are entering the VIP world of Big Companies, you are ready to win but this amount will not let you diversify your portfolio enough and you decided to buy three stocks for your money. Done. And then for some reason price dropped, and you were scared of your first really RED day and decided to fix losses telling yourself that at least part of them will be compensated by profits you’d made before. You remember Rule #2 – yes, you are not ready to play long. You are closing positions by fixing losses and trying to convince yourself that good that you saved at least something. Goal achieved – you lost money and you are unhappy.
Please remember – you always have a choice – one is to read Finsmarta articles and stay rich and happy or the second is to become an ‘expert’ in your own way and, who knows, maybe one day we will publish your story