I read this on a different site this morning and figured I'd share. Many truths in here. Get educated, and learn the mistakes. It is fun when you are up, but most will lose if you are chaser..
"The first thing you need to learn is to not lose money.
Making money will come later.
Understand that trading is most people a losing game. You are competing against supercomputers, people with decades of experience and also people that can take losses without wiping out (blowing up their account). You will lose your money, unless you learn how to protect it.
Cut losses and ride winners. You will be inclined to sell winners to “lock in” your gains and you want to ride your losing stock because “if I don’t sell I won’t really lose” or “it will improve over time”. That wrong, sell losers and hold winners... but winners will have down moves, so you need to sell at some point. That’s what they mean with “don’t marry your stock”.
There are many good traders here, some even fantastic. But do your DD (due diligence - research into FACTS). Also when it comes to people. Its simple actually, people don’t like to publicly fail, so entries into stock are often quiet, silent.
When you hear someone scream BUY BUY then they have a motive, they need volume into the stock to grow. And more important when they are cheering “booooom” “wheeee” and whatnot... then you start to sell. Its a topping signal. Cheering has the effect that people “chase”, which means they buy the top, when the trade is over. If you enter into the stock then the R/R is crap. The risk reward is crap. The downside will vastly outweigh the upside.
DO NOT CHASE.
And this one is of vital importance.. float. Float is the amount of shares that are liquid on the market. Let say a company has issued 100million shares, but 50million are held by bit institutions such as hedge fund and 30million more are held by insider owners (CEO, management or someone that owns 10%+ of the shares) then the float is 100 - 50 - 30 = 20 million shares.
LOW FLOAT PLAYS WILL KILL YOU. Once the hype train starts to buy into a stock, then make sure that there are enough shares traded each day for you to safely exit. Of you get stuck with shares you cant reasonably sell. The lower the float the stronger the up and down moves. Selling 10k shares in Microsoft wont budge Microsoft share price, selling 10k shares into a low floater can lead sho 20% moves. If you chase and chase into a low floater once it already moved up then you cant sell reasonably.. you are a bag holder.
If you start out, then buy spy etfs. one share in such an etf is like buying a slice of 500 companies at the same time. Its called index trading. Or buy large caps, those are companies that are worth many billions of dollars like F, coka cola etc.the smaller the market cap ( total price of all shares outstanding added up) the higher the volatility ( prices can shoot up and down like riding a bull ).. so for now you should focus on large caps.
Practice trading on paper. Tradingview.com allows you to trade pretend money. Do this religiously as if its real money. Keep a notebook and note down your losses, why they failed. Read that notebook every now and then. Track your losses, not your gains. The first thing that tends to disappear ia the bookkeeping if things go bad.
And i will be blunt, an ahole perhaps.
But we have seen quite a bunch of new people joining boards/chat rooms recently. Its actually a bad signal. Once beginners start its often at the wrong time. Markets have gained so much lately, we are in very uncertain waters now. A few months back the R/R was great. Only a little downside vs enormous upsides. Now it’s not like that. All the signals say we should go down, but we still go up due to whatever reason... manipulation maybe. I dunno. So its a confusing and thus a difficult market. If you have been in for months then you are golden... but entering now is kinda ... dumb. People joining now tend to trade more emotionally. FOMO (the feat of missing out) rules. These chasers have seen how much the market moved but didn’t enter, too scared or whatever other reason. Lots of new traders will buy on fomo into a pumped peak of low volume/float/cap stocks. Once they buying stops people will sell, but the fomo traders will hold because they haven’t learned to sell losers. At some point they will be at a loss, and that loss grows. But in the end all the shares bought at the tops will be ditched at massive losses.
The “dumb money” is late to the party, is clueless about risk reward, holds losers and sells winners.
Do not aim to make money, aim to preserve it.
And especially do not mistake gains made of exceptional market conditions for you being smart, you and I are not, we will not beat the supercomputers.
So me being rude... seeing a flood of new traders is a bearish signal.
Just remember how many stock trading advertisements there were at the peaks of 2000 and 2008. Its the big boys that want to draw in more money into the market to maximize gains and sell their shares to.
The most famous example on youtube. Jim cramer about lehman brothers (keep in mind he is paid by goodman sachs).
So the first lesson is.. you are the dumb money and now I would challenge you to undumb yourself. These boarda are a gem for doing so. But do not chase, do not get blinded by the cool tags mega follower/ names. If they talk a stock up then they need your money to inflate the stock or to sell into the stock (cheering is often a last ditch means to drag in some more volume).
There are traders that are just damn good and they are quiet."
