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That’s the good news. The bad news is that these companies are just selling you tools and services. They are not selling you any guarantee of success. It doesn’t matter if you make a profit or lose money, the trading company will still get paid for each trade.
Since you are considering entering the stock market, you are most likely planning to get a significant return on your investment, and that return should be better than what you would get by investing your money in mutual funds (less risky than single stocks) or even risk-free certificates of deposit (CDs) where returns are guaranteed.
So, how can you achieve such returns? The answer is of course simple and well known: buy low, sell high. Do this most of the time and you will become a successful stock investor. Now the first problem arises: How do you know when to buy? There are probably several ways to do this, which we won’t discuss here, let’s assume that you somehow know or think you know. Let’s say you get lucky and the stock you bought goes up just as you planned.
Now another problem arises: when to sell? What do you do after the stock is up 20%, do you sell now, or do you wait until it’s up 50%, 100% or 200%? Do you listen to investor news and do what everyone else does: sell, buy more or keep holding? If you choose one of the first two options, how much of the stock should you buy or sell? Or if you hold on to the stock, are you sure it will keep going up, or can you wait until the stock price returns to its previous level and lose value and make a loss?
The truth is that some people actually know the answers to these questions most of the time and actually make a profit. The question is: Are you as good as these people? Most people lose money by guessing and trying to time the market. If you are new to this game and don’t plan to spend much time researching, chances are high that you will lose. You will be competing with professional traders, big players and insiders who mostly profit because others keep losing. Also, what are your chances of predicting the market? Your chances are very low.
Some may argue: “I had this stock, I sold it when it was up 20%, but if I hadn’t sold it then, it would be up 300% now. How stupid I was when I sold, I would have made a lot of money if I hadn’t. I should do it again. This proves that I can really make a lot of money there and it’s easy!” That’s true, you can make a lot of money, but it’s not as easy as it looks. Suppose you didn’t sell the stock when it was up 20%. Then what makes you think you will wait until it rises 300%? You might have sold it only when it was up 25%. Or it may have fallen several times below the 20% rise, you may have thought it would fall forever and sold it even at a profit of less than 20%.
As a result, it is easy to look back and see all the mistakes you have made. But doing the right things for the future is very difficult. Unless you know the market trends well, understand the relevant sectors and the financials of stock companies, you most likely won’t be able to make profitable trades. Even professional traders make mistakes and lose money. If you are not one of them or do not plan to become one, your best option would be to invest in CDs, mutual funds or your own business.
