Dear Fellow Investors,
Before I start I want to answer one question that haunts the minds of many new traders:
And that is… HOW CAN I GET RICH QUICKLY WITH STOCKS?
And here’s the answer:
I firmly believe that no one can honestly answer that question. But with certainty I can tell you how you can get poor very quickly in the stock market:
By trying to get rich very quickly!
So here are the 7 most common misconceptions of beginners:
- Believing that they can turn $100 into $1000 and $1000 into $100.000 in no time. All they have to do is enter low and exit high. Buy at $1.- and sell at $150.- That’s it! Piece of cake!
2. Believing that there is a system that is 100% accurate and foolproof and they, of course, have got it!
3. Believing that they can outwit and play a trick on the market predicting highs and lows and other turning points.
4. Believing that they can be on a winning streak all the time.
5. Believing that just because a $20 stock was at $100 before, it’s going to see that mark again. And so they start trading without any fundamental background and knowledge about the company they want to trade
6. Believing that they will quit their jobs after a few months of trading never having to work again.
7. Believing that only a 100% profit is a real profit and not settling for less.
This is what a lot of novices just love to believe! But it’s a fallacy! Nothing else! But this fallacy can be very dangerous right up to the point where entire trading accounts literally get wiped out!
SOME CRUCIAL POINTS IN TRADING AND MANAGING YOUR MONEY:
- Any trade should be financed with money that you don’t need i.e. that is not tied to any essential ongoing needs. Never take up a loan and borrow money to finance your trades! This is of vital importance!
2 . Trading is not a lottery game, a sport, a hobby or any other pastime activity! It’s serious business and should be treated like one!
3. Adopt a system that suits your trading style and personality using a clear plan for your trades!
4. Don’t put all your money into one trade! Never! Remember to survive to trade another day!
5. Do not overtrade having too many open positions. In the case of stock trading, have no more than 10 – 12 stocks otherwise your trading account could become obscure and for some people difficult to handle.
Having more stocks also does not increase the chance of making more profits. It’s not the quantity that counts but the quality of stocks you own! For options, I’d keep it down to 3 at a time. No more.
6. Keep a record of all your trades.