A Virgin Trader

I thought this title might get you interested; it’s a classic blog sucker title. I feel almost guilty using it. I remember reading somewhere that if you want to get people to read your article, blog, story, etc on the internet, put ‘top 10′ or ‘top 100′ in the title.

As a virgin share trader who has read more books on share trading, in the last couple of months, than is healthy for any normal sociable male, it’s time to share my top ten – share trading mistakes.

To kick off, the first (and in no particular order) is:

1.  Bulletin Boards
Listening to closely to the bulletin ‘bored’ gossip. Don’t get me wrong, some contributors are committed to their chosen subject, know what they are talking about and really want to help pass on information. Some will even cut and paste relevant data from company reports and statements and many are only too willing to give advice. However on the whole, I think that whilst they should be seen as part of your research, don’t take them too seriously, there are definitely some mischief-makers out there.

2.  Tipped shares
Now I know it is tempting, and I have flirted with that option myself, after all why not ‘take the advice of an expert’ I hear you say. Tipsters, journalists, brokers, they all say they have the inside track and when you’re a virgin trader everyone knows more than you. If you want to follow a tip, then add some research of your own before you spend good hard earned money.  If you buy purely on the strength of a tip then you only have yourself to blame if it all goes **** up.

Remember – I told you so.

3.  Overtrading
Every book, article and comment I have read so far mentions this somewhere. “Don’t overtrade”.  The important thing to remember here is that trading costs money. Each deal has its associated overheads –  commission (on buying and selling), stamp duty, etc. The more deals, the more overheads. “Simples” as the animated character on the TV ad says. You know the one for that well-known price comparison website.

Costs aside, overtrading also gives you a sense of over confidence, especially if you have made a few early profits.  Over confidence for a virgin is very, very dangerous.

4.   Hanging onto losers
In this current ‘summer rally’ that would be difficult. Everything has just gone up and up for the last few months.  You would have to be a Muppet not to have made any money this summer, but it will not last.

The point I am trying to make here is that you must not get emotionally attached to a stock.  Forget that it was the first share you ever bought and you love it. ‘It is not a puppy’.  If it is going up and up, take some profit. If it is going down, get rid of the bugger.

DO NOT hang onto it thinking ‘l’ll just wait until it goes back up’. That is what stops are for.  Add a stop to every trade to minimise any loss. Remember, money tied up in a dropping stock is money you cannot trade with. So get rid of it.  You must accept the loss and move on. Having said all that however don’t sell too quickly either. Don’t sell every time your shares go up a couple of pence; remember what I said earlier trades cost money.

Did I say ten? I meant 4. I have work to do now and the markets are open. I will give you some more Virgin Trader Top Ten Mistakes tomorrow.
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Tags: Top 10 mistakes