Weekly Lesson Wednesday📝 

Common Investor/Trader FUCK UPS 🤬

^_Lesson
Words of Caution

Listen we have all been there. Guys start off trading and investing and in a few months think they are Buffet.

Finally, reality hits after you shit away a bag of cash and you realize you don’t know jack.

Well, today I’m going to try give some of you boys, that are newer to the game a few lessons to not fuck it up.

Here we go !

👉 No Plan 

We have said this time and time again. In fact we have a lesson on it (here). Experienced traders get into a trade with a well-defined plan. They know their exact entry and exit points, the amount of capital to invest in the trade and the maximum loss they are willing to take.

Beginner traders may not have a trading plan in place before they commence trading. Even if they have a plan, they may be more prone to stray from the defined plan. Don’t be that guy. Make a plan and stick to it !

👉 Chasing Performance or FOMO

A very common one for beginners. You see a trending stock that has been rocketing for the last year or however long and you want in. This can be dangerous and in my opinion, if you are seeing something take off and you haven’t gotten in early. I’m sorry bud, forget about it. The rides gone find a new one.

The gains, if there are any won’t be recreated like they were at the beginning. The word is out there and the juice is being squeezed to the last. Learn from it and be ready next time to try and catch the trend early.

👉 Forgetting your time horizon

Don’t invest without a time horizon in mind. Each trade or investment is different. Some stocks are for the long haul. Some are short term gains. By doing good research you will figure out whats what. Your portfolio should ideally include a range of time frame stocks from short to the longer.

👉 Not using stop lose orders

For the aspiring traders out there. A big sign that you don't have a trading plan is not using stop-loss orders. Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole. These orders will execute automatically once perimeters you set are met.

👉 Letting Losses Grow

Please don’t fall for this. Just like cashing out when your stock is up. Knowing when to get the fuck out and suck up your losses is as important.

If a trade is not working out and move on to the next trade idea. Unsuccessful traders, on the other hand, can become paralyzed if a trade goes against them. Rather than taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out. A losing trade can tie up trading capital for a long time and may result in mounting losses and severe depletion of capital.

👉 Averaging up or down

Averaging down on a long position in a stock may work for an investor who has a long investment horizon, but it may be a scary situation for a trader who is trading volatile and riskier securities.

Some of the biggest trading losses in history have occurred because a trader kept adding to a losing position, and was eventually forced to cut the entire position when the magnitude of the loss became untenable.

👉 Believing false buy signals 

When you see a sharp dip in a stock. The first question you should ask before you buy the dip is why? It could be a great opportunity, but it could be the beginning of a complete drop off.

Deteriorating fundamentals, the resignation of a chief executive officer (CEO), or increased competition are all possible reasons for a lower stock price. The fundamentals could also be a factor. It is important to always have a critical eye, as a low share price might be a false buy signal.

👉 Not doing your homework

Honestly, the most important rule of thumb. If you put in the work you will get results. New traders are often guilty of not doing their homework or not conducting adequate research, or due diligence, before initiating a trade.

For a new trader, the urgency to make a trade often overwhelms the need for undertaking some research, but this may ultimately result in an expensive lesson.

It’s a learning process. Just put in the time and you should be golden.

Thank you
That’s All Folks

Thank you for reading. Like usual. Not financial advice.

Full disclaimer here

Cheers,