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Mistakes Most People Make When Getting Into the Stock Market

November 7th, 2014

Many people are always out for the quickest way to make a buck. Some of those people think about or actually for stock trading or investing. After all what good is your money just sitting in the bank account making 1% on a CD when you can be making 15% on your money right?

All too often I see amateurs with $1,000, $5,000, $20,000 or even $100,000 try their luck in the stock market. I say try their luck because they gamble it versus truly understand it. The amount of money they have does not mean they are professional – it is the mind-set and they way they handle themselves that really separates the pro’s from the beginners.

My Beginnings in the market

I started stock trading when I was about 15 years old. Illegal you say? No – not really. My mom was doing most of the trading and it was under her account. I used the computer to make trades and I personally did make a few choices on my own as well. That was like gambling! I still had very little knowledge of what was going on. I took my bets and picks based on what I heard on TV, the news, or from other people. It was not a stable way to make decisions or choices of what was the right thing to buy or sell. You are basically throwing a dart when you are blindfolded after being spun around in circles 20 times.

Of course you are probably thinking to yourself “I’m not 15 and I’m not stupid”…. RIGHT…. I wasn’t stupid at 15 either. I just was not educated on the stock market or experienced. How educated or experienced are you?

Right now I can say I have been trading on and off for about 10+ years. Not all of those are stable years because of my focus on my various businesses, but I spent countless hours studying stock market education and executed thousands of trades. Some amazing trades and others horrifying, but over the years I learned to be a fairly good trader in my opinion. So let me share a few things with you especially if you are a beginner.

Some common mistakes most beginners make

  • Most beginners go into stock trading for the wrong reasons and do not understand the level of involvement and dedication you need to be successful. By successful I mean making money versus being net-negative. You have to study and put in as much time as a doctor does to get his degree if not more.
  • Many beginners try to hop into popular companies or IPOs (initial public offerings) such as Facebook, Zynga, Groupon, etc. The reality is most IPO’s fail and suck. You need to wait until the company stabilizes and when the big-boys step in and then ride the wave with them.
  • Do NOT get emotional. Many people get emotional to their money. It’s only money. Weird as to say that you have to be secure enough internally to where you know it is just money. You control it – it does not control you.
  • A lot of people will tell you “only invest in what you can afford to lose.” What the HELL ARE THEY THINKING! If someone tells you that – they do not know investing or are not successful with stock trading. Meaning they are advising you on things they should not be…. Why would I invest in things where I am planning to lose. What the hell is that kind of strategy? Are you kidding me? Yes you will lose money on trades, but have the right mentality for goodness sake.
  • You need to study and find your trading strategy. Quick following people and letting stock news or CNBC influence you. If struggle with it – then get rid of your TV (hence one of the reasons I do not have a TV).
  • Learn to trade on your own so you can be consistent and know why you are getting into stocks versus following anyone else blindly. Although it may be fine to find gems from other people, but understand why you are getting into trades
  • Have an exit strategy along with a risk/reward strategy before you get into ANY TRADE! Most people debate their stock after it goes up $3 or down $3… they wonder what they should do. Know what to do before you get into any trade.

How to gain the right experience

Yes they have stock trading simulations but those are not real. It’s not real money which means its not real anxiety. Emotions play a huge role in the stock market along with mental decision making all which can be swayed by using real money. I highly recommend when you are learning to do trades of 1 share or 3 shares if you are doing partial exits (to sell a 1/3). Of course you will always be losing money most of the time because commissions will chew you out. But you will gain experience without risking much at all.

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For example, if 3 shares of XYZ at $25/share goes down to $22 you lost $9.00 on the trade and maybe $14 on commissions  but better than $500. Do this until you can confidently make profitable trades. It’s the experience for future gain that’s valuable. NOT the current financial gain immediately. LEARN THAT! Many people are hunting for instant gratification when in fact delayed gratification will be much more rewarding. I promise you.

If you are interested to learn more about the stock market take a look at my trading website at: Tradersfly.com which focuses specifically on stock market and trading education.

Author: Sasha Evdakov

I'm Sasha Evdakov, an educational entrepreneur, and a study dork. I am an expert in business, marketing, and financial concepts. I want to share with you real world education and experiences so you can evolve your life to the next level and do what you love to do! Connect with me on YouTube, Google+, Facebook, or Twitter