Top 10 Mistakes that Traders Make




10. Buying on the upswing

Ever look at a daily stock price chart?  Stock prices generally fluctuate up and down on a short-term basis.  A stock that is up today will likely be down tomorrow.  If you buy on an upswing there's a good chance that you'll go into negative territory soon after.  Buy on the dips instead.

9. Giving too much credence to message boards

People trade stocks for their personal gain, and will do whatever they deem necessary to increase their gains.  This includes trying to stir up greed in the buyers or fear in the sellers.  Next time you read an investment message board, realize that every single post was made by a trader with his or her own interests in mind.

8. Selling for a loss

People are naturally impatient, especially in the stock market; they want quick and large gains.  The longer they hold a non-performing stock, the more eager they are to sell - even at a loss.  Frequently selling at small losses has the same, opposite effect of frequently selling for gains. You're compounding your losses.

7. Shorting stock

The market has a natural tendency to move up over the long-term, both in duration and magnitude.  Shorting stock puts you against the odds from the very start.  Moreover the market has a tendency to become irrational and unpredictable.  Overvalued stocks can always become more overvalued, which puts many traders in the poorhouse.

6. Not maintaining limit sell orders

The frequent and large stock price fluctuations present prime opportunities for compounding gains.  You want to ensure your stock is always ready to sell at a moment's notice.  If a single trader is willing to pay a 20% premium on the current market price, take him up on it before someone else does.