7 Deadly Sins of Stock Trading

Stock trading can be a wonderful and profitable thing. But 90% of all people fail to make any money at it whatsoever. That is because of these 7 deadly sins.

1. Greed

Most people get into the stock market because of greed. To be honest without greed I doubt there would be a market at all. But going too far can really hurt you.

It is a reoccurring pattern that happens again and again. You buy a stock, watch it go up and up and then just assume that it will continue. So of course you go all in, and you are feeling pretty good about yourself
until the market crashes and you lose all of your money.

Stocks go up and they go down, never bank everything on one stock just because it has been making 200% returns every year.

2. Fear

The great depression lead to an interesting quote, “we have nothing to fear, but fear itself.” This is really true and really what causes the market to crash.

When stocks start selling off it is easy to want to sell everything and “make it all better.” It’s also easy to disregard any plan you already had in place and just tell yourself, “I just want to get out of my positions, I don’t care what my plan was, I follow it next time.”

But don’t do it. 90% of traders fail to make money and 90% of traders will panic every time they think the market will go against them. I’ll let you decide if there is any connection between those two things .

3. Conformity

There’s safety in numbers right? Wrong! If that were true then the numbers would be the other way around (90% of people making money and 10% losing). The most successful people, in all areas of life, are normally the ones that think for themselves and don’t just follow the crowd.

Oh, sure you could just listen to the news and buy every hot stock tip you hear about, you might even make money here and there. But I know how that turns out in the long term, and it isn’t pleasant.

4. Unpreparedness

Most people will fall into the traps set by fear and greed because the market does something that they didn’t expect and now they don’t know how to react to it.

This is why you should know what you will do if your stock goes up and what you will do if it goes down. This way you have some basic guidelines to follow when you want to just panic and sell everything.

5. Caution

Of course a certain amount of caution can be a good thing. You don’t want to throw caution to the wind and go all in on option trades. That will eventually lead to a bankrupt account.

But at the same time, there are a lot of traders out there who have been paper trading for 5+ years, are making a good return, but are still scared to put any real money in the market. At some point in time, if you want to make money trading stocks, you are going to have to jump in.

6. Impatient

Of course don’t just jump in whenever. Waiting for the right time to enter a stock works out the best. Have a plan on when to get into a trade and wait until everything is telling you to go. Getting in early and speculating can lead to a lot more losses in the market.

7. Unpractical

Another sin is simply being unpractical. I came into the market assuming that I was going to triple my money every year and be living like a king in just a couple of years. I didn’t work out like that.

There is too much hype out there about stock trading. The S&P 500 makes about 10% a year, if you can double that, or triple it you are going to be one of the best traders out there. There are traders who have turned $10,000 into $1,000,000 in a year, but they had a lot of experience beforehand and there was a lot of luck involved as well.

Needless to say it is not the norm. Get a nice consistent return on your money and you will be surprised at just how far that takes you.