One common mistake of a novice trader
There is one of the most popular trading mistakes that often prevents beginners from making a profit. Let’s imagine the mindset of beginners. Beginners want to earn quickly, a lot and with minimal effort. And most likely, we know from our experience, they will be quite fearful. So they will choose those instruments that are well-known and have a good reputation. These will probably be stocks of companies such as Google, Meta, Amazon, Apple.
How will beginners add companies to their portfolio?
Let’s specify that the stocks of these companies are not cheap and cost $100-300. Of course beginners want to fill their portfolio on enthusiasm right now. This means our trader will go to the stock exchange and simply buy them.
What is wrong with that?
The point is that you should buy shares of even the seemingly coolest and most famous companies not at any moment of time when you want to, but look at whether it is a good time to enter a position.
What does good or bad timing mean?
In investing for 10-15 years the concepts of good and bad time lose their relevance. Because for such a long period of time stocks can fall and rise 100 times. But if we speak about from 1 to 6 months trading, it is very important to choose the right moment. Because you need to earn money rather quickly and you want to earn more, of course.
For the sake of simplicity let’s consider 2 companies: META and AAPL. Both of them have a beautiful growing chart for the last year of trading, but you should not buy both companies now, if you take them for a short term.
The fact is that META and AAPL stocks are at their all-time highs right now. They have rallied strongly over the past couple months and there will soon be a period when the price will be corrected. Since there is no one chart in the market that is a forever rising straight line. There will always come moments of correction. And if you buy their stocks now, you are very likely to buy at the most expensive price in recent times.
That’s why it’s important to learn how to analyze charts and choose the moments to buy or sell smartly.
