Change text size

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Trading Mistake #3: Thinking that investing is safe, but trading is risky.

This might have been a logical mistake 30 years ago, but not today. In fact, trading, or speculation as I call it, accounted for many of the biggest winners on Wall Street in 2008. Sure, I have heard that the market is always higher 20 years from where it is today, regardless of the pullback. That might be true, but doesn't it make sense that if you could better predict a top in the market, you would sell and sit tight until opportunity popped up again? Here are the top reasons why investors are afraid to be traders:

• Long-term buy and holders just don't like to sell. First I hear the words, "but I will have to pay taxes if I sell." Let me tell you, taxes have dropped significantly in the past few decades, so I ask you this question: If you could go back to the year 2000, how many of you would sell lucent technologies at that time? Surprisingly, even if people had insider knowledge that a top was in place, they still wouldn't have sold. Funny, though-taxes are not much of an issue like they used to be.
• Commissions back in the '70s and '80s used to be more than $100 a trade. I can see how trading a lot as a retail trader would have made your broker rich, but that's just not the case anymore. Discount brokers are setting up shop as numerous as hotdog stands in Chicago, so price is not a factor anymore. The average cost to buy or sell stock now is around $5 a trade. That is whether or not you buy or sell 1 share or 5000 shares.
• Bid/Ask Spreads have also been a sticking point for investors not to take a profit. Sure, I remember the days of 1/4s and 1/2s that stocks used to trade between. Now, stocks are just pennies between what a buyer and a seller want for stocks on the floor. These spreads are much more advantageous for a trader and there's no excuse to get out of a stock if it's gone past its extreme or has a pullback pattern in place.
• Finally, the number one reason why investors don't want to be traders: they think it's too much work. Well, think about this real quick: the people who put in more work in their jobs typically get paid more. Don't you think that should be the same in the stock market? Okay then, let's think about putting a bit more work into managing our own money. Profit Strategies can help you understand how to be a prudent investor as well as a trader when patterns dictate movement in the markets.

As an investor, there really hasn't been a better time to start putting some of our longer-term strategies to work. Markets have pulled back greatly since last year, and this may be the beginning of a long-term move back to the upside. Profit Strategies can help you understand how to be a prudent investor, but also a trader when patterns dictate movement in the markets.

Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Recent Articles by Tom Gentile, ProfitStrategies.com

• November 18, 2009
  Mind Matters: Learning
• November 9, 2009
  November 9, 2009
• November 2, 2009
  Change of Costume!
• October 26, 2009
  Weekly Outlook, Oct 25, 2009
• October 19, 2009
  Spreading Risk in Many Ways, Part 1