The Biggest Mistake Rookie Stock Traders Make - Investing Shortcuts

The Biggest Mistake Rookie Stock Traders Make

By January 21, 2019Stocks

Trading stocks, or any other market, is fraught with danger. Traders can use too much leverage, be undercapitalized, trade without stops or do any number of stupid things.

The biggest mistake made by new stock traders is trying to make money.

That’s right—I’ll say it again: The biggest mistake made by new stock traders is trying to make money.

Right now you are likely thinking something like “Wait a minute, hold the phone. I thought the whole idea of trading was to make money.”

Well, it is. But only after you have learned how to lose money.

The indisputable key to stock trading success, or success in any other market for that matter, is the ability to take losses and manage risk. Without this ability and discipline, your trading career is likely to be very, very short.

The most important thing for new stock traders to focus on is not losing money.

And just to clarify, losing money is fine and is a big part of trading. Taking big losses, however, is not fine and will lead to account ruin.

A profitable trading endeavor can only be achieved once you are proficient in risk management. This means learning to lose like a professional.

If you were to ask a seasoned trading professional (someone who has successfully made a living trading stocks or other financial markets) their thoughts on the matter, you would likely get a response like: “Good trades tend to take care of themselves, it’s the bad trades that you gotta worry about.”

This statement says a lot. It also alludes to one of the primary rules of trading: Let winners run and cut losses short.

If you are a new stock trader, forget about making money. Focus your efforts on risk management, position management and not losing money. Your trading career progression may look something like this:

  1. Lose money
  2. Lose less money
  3. Breakeven trading
  4. Profitable trading

Focus your efforts on not losing money, and profits may potentially take care of themselves.

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Jeremy Blossom

Author Jeremy Blossom

Jeremy Blossom has been building ideas to grow businesses for more than 15 years. For over a decade Jeremy was active in the financial industry and his understanding of the financial sector is vast and deep. Under his leadership, he delivers result-focused strategies and executions that are designed to do one thing: make clients more profitable.

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