We’ll discuss a few key points in this article that will keep you out of the stock market graveyard. First, don’t start trading unless you have money to lose. You’re obviously not going to lose everything like you do in a casino, but if you don’t do things right, you can lose quite a bit.
Do Your Homework
Don’t buy a stock just because it’s gone up 10% in the last few days. A lot of people make this mistake. They get excited because they think they can make some quick money, but then they buy the stock at it’s peak and it ends up going right back down where it started. To sum up this tip, do your homework before buying anything. If you don’t you’ll definitely come out on the losing end, unless you’re really lucky…
Check your ego at the door.
If you go into the stock market thinking you’re above it all, thinking you know everything, you’ll definitely come out on the losing end. Don’t be afraid to listen to your broker if he tells you that something is a bad buy. Even though most brokers are less than liked people, they know what they’re talking about.
Know when to get out.
Another mistake many beginners make is waiting forever for a stock to go back up. They think they can make back what they lost by waiting it out. The thing is, you can probably make more money somewhere else instead of waiting for your loser to climb out of the proverbial gutter. Cut your losses and forget about it, which brings me to my next point.
Develop a bad memory.
You can’t dwell on things in the stock market. You’re gonna pick some losers here and there. It will happen. When it happens, just cut your losses, forget about it, and move on. The same with winners. When they’ve made their run of the century, get out before they go back down. Don’t get greedy. Stay in the present always! Just because a specific stock had a good year last year, doesn’t mean they’re going to have another one this year. You’ve gotta stay in the loop.
D D D D diversify!
The worst thing you can do, short of betting the farm on a penny stock, is put all your eggs in one basket, or one industry in this case. You’ve gotta spread your resources across a many different industries, and even many different investment types. The reason for this is… when one industry is having a bad run, another industry is almost certainly having a good one. You’re good ones will outweigh your bad ones.
There’s plenty more to the stock market, but these 5 tips will help you when you’re just getting started.