6 Stock Mistakes That Can Cause A Trader To Lose Their Money By Shaun Rosenberg At Isnare.com Ezine Articles

There are 6 critical mistakes that stock traders make. These mistakes are made by both amateurs and experienced traders alike. They can be devastating and make one lose all of their money in the stock market. These are mistakes you definitely want to avoid. That is why I have put together a list of what to do and what not to do, when trading in the stock market.

What not to do.

1. Do not buy what the news media tells you to. Way too many people buy stocks based on what they heard on the news last night. While some people you hear talking about a certain stock on the news know what they are talking about others do not. Even if you could figure out who is credible you don’t know what they are thinking. You don’t know when they would get out, or in.

2. Do not buy what a friend tells you is the next “hot pick” in the investment world. This can be even more dangerous than relying on the news to make your investment decisions. Often times your friends hot pick can be the next great disaster. You must create your own rules to follow when trading.

3. Do not overtrade. This is a mistake many professional traders will make. They will have developed a system that turned their $20,000 into $100,000 in 1 year. Then the market changes. They continue to trade their same way and lose it all in the next 2 months. When money isn’t easy to make in the markets don’t trade because you’ll probably lose what you have now.

4. Do not risk too much on 1 trade. As a rule of thumb you should not risk more than 2-5% of your portfolio in any 1 trade. Also don’t risk any more than 10% of your account in option trades. Risking any more than this can be dangerous to your financial future.

5. Do not bottom fish. This goes for top picking too. I’m sure many bottom fishers lost a lot of money buying Enron stock. That is really all I need to say.

6. Do not stay in a losing trade. This is something I have seen a lot. Someone will buy a stock at $56 and stay with it even as it goes lower. First to $45, then to $35 and then $20. If you are in a stock that goes against you need to get out.

What to do

1. Do develop your own system. No one cares about your money more than you do. Creating your own trading system is the best way to go about investing your money in the stock market.

2. Do paper trade before risking any of your own real money. If you can’t make money on paper chances are you won’t make money when you put real money in the stock market either. Best to figure it out on paper.

3. Do always use proper risk management. Remember never risk more then 2-5% of your portfolio in any 1 trade. Cut your losses short should be your first concern.

Published At: Isnare Free Articles Directory http://www.isnare.com
Permanent Link: http://www.isnare.com/?aid=238731&ca=Finances

Important Notice DISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.