Common Stock Market Mistakes

Thursday, April 7th, 2011 at 6:03 pm

Common Stock Market Mistakes

By Shaun Rosenberg

Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.

The first common mistake is relying too much on the news and other events. Spending a lot of time watching the news will not really help you out that much. In fact in many cases it will actually harm your results because you will panic and make foolish mistakes with your money based on what somebody said about some rumor about china and it’s economy.

The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,

One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.

But if you had a plan that you actually believe in and are just second guessing your original plan because of something you have heard or some recent market event it is normally a better idea to simply keep to your original game plan and not do anything until your original game plan tells you to.

Finally not having some strategy in place which allows you to limit your losses can be a pretty bad idea. Whether you limit your losses through diversification or stop losses or both you need to limit your losses somehow or risk losing everything on one trade.

Those that have learned from their mistakes and keep learning have been rewarded in the stock market with higher returns and greater wealth.