From the 2018 Penny Stock craze to the harsh reality of crypto trading, the stock market has made a fool out of millions like it always does. “Gurus” telling you nonsense, training courses manipulating you, the nuances of stock trading have been minimized to the point everyone at the tap of a smartphone feels like the Wolf Of Wall Street. This has caused many to lose massive amounts daily by exploding their accounts from bad tips on penny stocks (in my young trading days I was a victim of this too). Looking back on the past years since the creation of commission-free trading has allowed me to see where I and others have gone wrong. With that being said, I’ve come up with 5 reasons you haven’t made any real money in stocks.

BUYING THE HYPE, SELLING THE FEAR

Every single day there’s someone online screaming “Stock XYZ TO THE MOON 🚀”. Everyone buys then the next morning the big guys sell and the little guys are left with the red screen. The reason why this is the first reason because this is the number one way to get a red screen. Buying only because someone said so and selling only because someone said so is a recipe for disaster. Firstly, if someone is telling you to buy best believe the other millions of people already did so that means the stock has already been pumped. Once pumped, you are buying at that pumped price (chasing green) is literally guaranteeing you will lose money. Why? Because when you took that tip to buy, the people holding are already anticipating to sell. This is called a Pump & Dump. The price gets pumped up then those same people dump it on you, you buy the remains trying to capitalize off of the hype not knowing that the real hype is over and this is just the calm before the storm. After you buy the stock tanks and your account is bleeding like an open wound. Most people go through this same cycle every time thinking they can get rich quick.

NOT DOING ANY RESEARCH

Research should be one of the main driving forces behind you purchasing shares in a company. Buying simply based off of a green line chart and affordable share price is again, a recipe for disaster. Many times stock can look good on paper today but if you look back more than this year (some people don’t even go back a month before buying) you would see that this company has been declining for quite some time (this is for my penny stocks). Most of the time a stock is a Penny (under 5 dollars) because it’s been sliding down the market hill for the past 10 years. Research gives you all the information you need to make an educated investment. Without research, how can you confidently believe in your position?

NO EXIT POINT

Everyone decides when to buy, but few anticipate when to sell. How you strategize entry and exit points is key to maximizing your returns but simply not designating a time or price to exit a position is one of the reasons you aren’t making any money. Here’s why: holding too long on a bad stock only increases loses while selling to soon stops loses but takes away the opportunity you could have had to break even. Given time stock may bounce back to its resistance (assuming you bought around that area) allowing you to sell and break even (or close to it).

BUYING JUST TO BUY

SO MANY PEOPLE DO THIS IT DRIVES ME INSANE!!!! People are literally trading just to say they are trading them wonder why they are always in the red. Free commission trading has been a blessing for some but a curse to most because of this. Like I said earlier, people download Robinhood then think they are the wolf of Wall Street! Enough of that rant though let’s talk the real. Simply put, buying just to buy is a guaranteed way to bleed your account. Usually, it’s people buying up penny stocks and assuming that it’s bound to shoot to the moon just because. Whether it’s pre-existing hype or some upcoming corporate action, buying for the sole purpose of buying is a waste of time, money, and energy. Did I already say money?

DAY TRADING WITH LITTLE BUYING POWER

Day trading is only MOST profitable when you have a lot of buying power. Why? Here is an example to explain. Say you buy stock XYZ at 20 shares for $10 a share totaling in $200. Then tomorrow it rises $2 dollars cause of whatever hype/pump raising your equity to $240 then you sell for a profit. If we think math you only profited $40. (Trust me, you’d be surprised the millions of penny stock folks hype for these numbers). Now imagine buying that same stock with more buying power. 500 shares at $10 per share equaling $5,000 worth of stock. Now that stocks share price moves up $2. Do the math (500 X 12 = 6,000) you are looking at $6,000. Sell that for a $1,000 and you’re looking at pretty good returns. In my opinion, this is a way more profitable and efficient way of using your money and capitalizing off of risk than toying with little buying power. If you’re going to day trade make it worthwhile.

Stock Trading has many some rich and many bankrupt. Identifying what we are doing wrong is only half the battle, but stopping the losses of potentially thousands of dollars is still as important as making it. Have you done any of the things stated above? Let’s talk Stock stories in the comments. Peace and happy trading!

Disclaimer

MoneyWise’s posts are for entertainment purposes only. MoneyWise’s posts and blog pages do not offer and will never offer Finacial advice. For financial advice, consult your financial advisor.