How to Avoid Losing Money In the Stock Market


In this post, I will go over 5 things that you can do to avoid losing money in the stock market. They seem simple but often are overlooked.  Whether you’re new to investing, or a seasoned pro, I feel this is worth a read. Sometimes we all need a reminder of some things we can always be doing to help improve our trading.

Do your own research

Don’t waste time listening to Bloomberg or CNBC, if you’re really interested in learning to trade.

They are what they are…a news source and that’s it. They are not a source for training or any form of education. They are there strictly to inform you of changes that happen in the stock market, anything that is out of the ordinary that you won’t get from the quarterly conference calls.

How I treat the news is exactly like this; they give me quick updates about things that could potentially have an effect on what I’m investing in. I then take it from there and do my own research on the subject and see if it’s really going to affect me.

Don’t get into listening to the hype, the media has a tendency to instill fear in us for sometimes no reason at all. They are there for ratings and the more dramatic they can make it, the more viewers they will get.

Doing your own research is imperative to your success as an investor/trader in the stock market. If you’re the type of person who isn’t going to let someone else manage your money (probably the reason you’re here, to begin with) then why would you listen to someone else’s opinion on why or what stock to buy? Always be open to listening to opinions, but that doesn’t mean you should take it to heart. Take it with a grain of salt, look into what they’re saying and then do your own research.

Everyone has their own opinion and they’re own money, just like you. If you are the one that has to deal with losses, shouldn’t you decide where your hard earned dollars go?

At the same time, they may not have the same objectives as you do when it comes to buying or selling a stock. You have your own money, your own opinion, and your own objectives. Don’t let anyone else cloud your vision for making  your own choices.


Know what you are investing in.

Some people invest in stocks just for the simple reason that everyone is and they seem like good stocks. The only research they have done is on the ticker symbol. And sometimes you might get lucky and that stock purchase might work out for you but more often than not, it won’t.

Why? Because if you don’t know what a company does to make money, then you will have no idea  what to watch for in conference calls and earnings reports to gauge  if things are looking up for the company or what could be  roadblocks ahead that could stunt growth or ultimately cause the company to go out of business. Or the other way around, you wouldn’t know if what they might be working on that could revolutionize society as we know it and because you know what they do and what they are working on, you could add to your position and make even more.

Case in point: Apple. People left that company for dead, some dropping the company at $10 a share only for that stock to top out for over $700 at one point. Oops. Don’t have an oops, know what you’re investing in before you click the buy or sell order button.


Know your risk.

Knowing your risk is something I kind of already touched on.You have to know how much you could potentially lose and still sleep at night.

You might ask “Lose money! I’m here to make money!”

Yes, we all are, but the fact is, investing is about risk-taking, and you have to know how much you are willing to risk and how to mitigate that risk.

The best way to mitigate risk is with diversification.

Do not put all of your account into one position or in one sector for that matter. Limit yourself. I size my positions by being able to put on 5 different positions at any given time, I put the same amount of capital into each. That’s 20% per position, so if the position goes down 5% you have only lost 1% of your entire account.

Now when they say on the news a certain stock is down 5% it doesn’t seem as bad, does it?  That depends on your strategy. Whether it is long term or short term will determine the risk tolerance you have to any given fluctuation.

For example, if you are a long-term trader and you take on a position and it drops more than  10%,  you can withstand that loss because it has much longer to recover. Whereas a shorter term trader may never hold the position long enough to even get a portion of that back, so their risk tolerance would be much lower.

Scaling in and out of position is another great way to mitigate risk depending on the size of your account and brokerage commission fees. Know how much you are willing to risk before you buy in a position and know what your exit strategy will be, it can save you so much time, worry, and money in the long run.


Focus on long-term growth in the stock market.

With the way things go today, with more and more people wanting instant gratification, it’s very easy to get wrapped up in what your positions do every day.

They went up. They went down. You’ll get motion sickness watching that all day, every day.

You’ll hear on the news the world’s all doom and gloom and you look at your account and it seems to be losing money and it makes you want to sell. You have to stop, rewind, and remember to focus on why you got in this to begin with.

Begin with why you decided to do this and that day’s loss will look minimal. Remember your plan when you got in that position, and remember that you’re here for long-term growth at least a year or more. (At the time of writing this, it’s way better for taxes as well.)

The market isn’t closing the doors tomorrow unless it’s Friday or a holiday. These companies are here for the long term and you should be too.

As time goes on, companies grow and you could grow with them. Nothing is built overnight, and your wealth will not be built overnight. Everything comes in time, so don’t waste time worrying about something you won’t even remember next month.

In 2012 I bought US Airways before they merged for $11 a share, it’s now American Airlines trading for more than  $45,  that’s more than a  400% return! The stock didn’t reach that in one day, month, or year, but rather several years. Doing your due diligence now can and will pay off in the long run, you just have to be patient and focus on the long-term growth.


The saying is true. Education is key and knowledge is power. Get educated plain and simple.

You don’t need to run out and get a degree in finance or business. It doesn’t hurt, but it’s not necessary. If you’re not sure about something, research it, read some books on it, watch a few videos and maybe even purchase a course about it online. But don’t act on something you are unsure of because you are afraid of a missed opportunity. That’s a sure fire way to lose money, I know because I’ve done it.

Learn from my mistakes and get educated. Find the things you need to learn and hone in on that one thing and learn it. If you need to know fundamental analysis, go find resources on fundamental analysis. Don’t find books or courses on stock trading itself, get specific with your education and you will get so much more out of it.

Knowledge of what you’re doing will give you insight on what you’re doing on a whole other level. It will help you pick up on the little things that could potentially cost you a lot of money. Often if you didn’t have that knowledge you would have never known what to even look for.

Never stop learning, this world is fast-paced, always evolving and ever-changing. The best way to stay on top of it is to never stop learning and always be in the know.

If you’re a new investor or trader in the stock market, before you even fire up your brokerage account please do yourself a favor and get educated. I know it’s tempting to just get started but if you don’t educate yourself the stock market will and the tuition is very expensive. Without an education, the stock market becomes the reason the school of hard knocks got its name. Take your time and do it right.


These are some very basic, but key factors to your success as an investor/trader.

Without paying attention to these tips,  you could potentially lose money and  we’re all here to make money.

It’s not a zero sum game, your success or failure will have no affect on anyone but yourself. I want you to succeed that’s why I’m writing this.

Just remember: Do your own research, Know what you are investing in, Know your risk, Focus on long term growth, and Get educated.

These five practices will set you up for success. Keep them in mind before you place every trade. If you are just starting to trade, and not sure where to start sign up for my FREE 3 part email course and I will tell you everything you need to get started on your trading journey in the stock market.