The better question is: How much money am I willed to risk in an unknown field with the potential risk of losing it all?
If you answered the questions with less than $2,000 than you should not trade! You can stop reading here.
So to be honest trading is one of the hardest business' to start & profit from.
Why? Simply because of our brain. Naturally it is not made for trading. In extrem situations we instinctively tend to do the opposite of what we should do to make money. When a stock rises slowly and builds momentum we wait because our brain is trained to watch till we feel comfortable to enter the trade with the lowest risk. In this example a stock we watch goes from $3 to $3.40 within in a week. Everyday we see the stock rises a little bit more so we wait till it shows us, proofs to us, its real strenghts. Over the weekend we check back the stock & its positive news and we decide to see how it opens the next Monday morning. The media picked up the stock and it is all over the place with good news. We think "Cool I found something really interesting. Finally I might place a solid trade and also everybody is talking about the stock. So it has to surge."
Monday morning we sit in front of our computer and want to see the proof of our well done research. Now it's time to bank! Isn't it? The stock opens and gap's up $0.20 and costs now $3,60. Our thinking: "Okay I wait a little bit for it to come down and then I will buy 500 shares." We keep watching it. Now the stock is going really crazy! It's going viral! Suddenly we feel like we are missing out a BIG opportunity and jump in to the stock no matter the price. We bought at $4,15. We bought into a big spike thinking the big money is waiting for us and we see us selling the 500 shares at $6.
What happens next comes unexpected and wasn't part of our plan. (To be honest we didn't even had a plan, didn't we?) The rush is over and our hot pick drops 10 times faster than it had surged. Our brain is really confused and wants the good feeling back. So it tells us to keep all the shares because it hopes that our stock will come back again. In trading hope destroys our bankroll. If we feel hope during a trade we should know that this is only the result of a bad planed, executed, undiscplined trade. Period.
Our stock consolidates in the mid $3s and at the end of the day it cracked the resistance at $3. We are still invested. On paper we lost 30% of our money and if we want to get at least break even the stock has to rise now 40%. But if you are still reading you know that the stock needed one week to make just 15%. So how long will it take to get our money back? We dont know. So we hope.
What I want to tell you guys here is this:
If you are a complete newbie or you feel new to trading than you should expect to lose money. Don't fall into this trap to watch 1 or 2 coaching videos & than jump into the water. NO! In many other situations this is a good idea but with trading it's different. You have to put in the work, you have to put in the time to learn, study your ass off to get a feeling for the stock market. Research, ask wethered veteran traders, paper trade and watch first what's really going on. Of course you should place a trade here and there but use small positions and always have a plan.
Last words:
thank you
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