3 Statements No Trader Should Ever Say

by Trading 101     Jul 16, 2019

For anyone that’s been trading or investing for a while, the chances are quite high that they met someone who pretended to be a big shot investor or trader but in reality, had no idea what they were talking about. Anyone who took a trading 101 class can pretend they know their stuff if surrounded by those without knowledge of markets, finance and trading.

However, when talking to those that live and breathe in the finance world, pretending to know something while actually just blowing hot air is going to likely result in being ostracized pretty quickly. A much better approach would be to simply admit to now knowing a lot and asking questions instead to learn more.

Here are 5 common statements to avoid when talking finance that weren’t taught in your trading 101 guide.

  • 1) “I Just Invested In X, Which Is A Sure Thing”

This is a very common statement that amateur investors will throw around. No single investment in anything is a sure thing. You could buy shares in Apple tomorrow and find out the day after that the value dropped due to a fire in its Chinese manufacturing plant.

No one can predict the market accurately. Some companies are notorious for hiding major problems or internal politics from its investors and shareholders. There’ve been companies in the last 10 years that no one would have predicted to fall and yet, they did.

Even more embarrassingly, if someone claimed to have invested in a company “because it’s hot right now” they’ve most likely gotten into the game too late and will either see a low return on their investment or even get hit with a loss.

  • 2) “Don’t Buy Stocks, The Market Is Down”

This is another big red flag often thrown around at dinner parties and social engagements. It’s a misconception that only because some markets are dropping in price and value, that it’s a bad idea to invest.

In fact, one might argue it’s the best time to buy when the markets are going down. As prices drop, investors will be able to purchase more shares. Most markets recover after a while and will start growing positively again – there are very few markets that never recover after taking a big hit or two.

It’s imperative to understand why exactly a market is “down” however. If markets are down due to something that’s unlikely to be resolved soon, it might not be a great idea to buy into them at that point in time.

  • 3) “I Made $X From The Stock Market Today”

There are instances wherein this statement could be accurate. For instance, when someone purchased a stock when it was priced at $20 per share and sold them today at $100 each, they could claim they “made” X amount on that day.

However, this scenario normally plays out differently. Someone will see that their investment in a certain market or stock has gone up in value and will then tell everyone that they “made X from the stock market.” This is a generally false statement.

If the gain in value is only on paper and not in cash, then no money was made. Nothing is profited until a stock has been sold.

Long term investors will see the value of their investment rise several times over the course of months or years, depending on the investment. That doesn’t mean that they profit every time the value increases. Their profit is the difference between whatever they bought a stock at and what value they sold said stock for.

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