Top 10 Novice Stock Trading Mistakes

1. Wanderers get lost. Setting out on your first foray into financial planning and investing without a well-planned investment strategy is like going on a cross-country road trip without a map. Taking the time to develop a well-thought out investment plan (includes your financial goals, personal goals, risk tolerance, available investment amount, etc) will help protect you from trendy, and often risky, speculation.

1. Passion fizzles. People are fallible and, more often than most like to admit, they make decisions based upon their emotional reactions instead of facts and research. Doing your homework will pay off in the long run.
2. This little piggy…Novice investors too often forget to take profits from stocks that continue to rise in value. Remember, what goes up must come down eventually. Do your research (maybe using some stock analysis software or an online trading service), read the professional analyses, and take your profits before you lose them.
3. Diagnosis: Analysis paralysis. Novices beginning investing in the stock market tend to “overdose” on information, becoming easily confused, overwhelmed and indecisive. If you’re on information overload, rely on the advice of your broker (if they offer it) and trusted resources such as Trending 123.
4. Few Pots of Gold. Don’t enter into the trading arena with a “get rich quick” mentality. While you may have success in trading, the most successful traders know that successful portfolio development is a bumpy roller-coaster ride. The market is volatile. If you don’t have the stomach for it, look for the lowest risk possible.
5. Enter at your own risk. A common misconception is that “low-risk” equals no risk. This is simply not true. Risk can be managed, but you must realize that it does exist with every trade. A well-researched trade can minimize the chance of a negative outcome, but you are always taking a risk.
6. Sleeping on the job. Many novice investors jump out of the gate strong, but their initial interest wanes over time. If you don’t have the time, or conviction, to regularly monitor your investment, rely on financial investment services and advice from professional investment counselors. Or, invest in established, well-performing mutual funds.
7. Many eggs, one basket. Remember the old adage “Don’t put all your eggs in one basket?” It holds true for investments as well. The truly successful investor has diversified investments to offset the ups and downs of the market. Spread your investments to increase profit potential and decrease loss potential.
8. Rumor has it. Novice investors are too often looking for an advantage in the wrong place. Don’t make trades based upon a “tip” from your neighbor or brother-in-law. Conduct your own research, consult your investment advisor and be sure the facts support the “tip” before you make your decision. Relying on tips alone can get you into financial trouble quickly!
9. Surplus Shopper. Never invest money that you can’t spare. Yes, you could make a killing in the market and triple your investment; but you can just as easily lose it all. If you can’t afford to lose it, you can’t afford to invest it.

Happy trading !!!