3 Insane But True Stock Trading Myths That Will Clean You Out

Even as we've been kept awake at night wetting our sushi night clothes for fear of losing trades and jumping off our house, the majority of losing trades come from misconceptions born inside our heads.

This is how most losing trades happen:

1 - Double down. Whatever moron thought of this idea had to be a guy with a lot of money. The original hypothesis of doubling down must have come from some intoxicated well-off chap in Las Vegas playing at the MGM Grand Hotel and Casino. The concept of doubling down is straightforward, if a stock you are sitting in goes down 15% in price, buy double what you originally bought. As time passed, as needy common folk got their hands on the idea, it changed into averaging down, meaning purchasing any extra amount of a stock that you are sitting in when it drops 15 % or greater.

Villainous stock trader Nick Leeson mastered the science of averaging down into losing trades, and took it to a whole new level. This double down stock trading whiz kid caused the fail of Barings Bank, United Kingdom's oldest investment bank, for which he was sent to jail.

Never fling good money after bad. Never risk more than you are seeking to gain.

2 - Value investing. This tactic must be the brain offspring of malicious institutional traders who hope the stupid common folk will help them in selling their longs in a down trending market. The idea of value investing is uncomplicated, look at the P/E ratio. If the average P/E ratio for a industry, such as Tech, is 18 and you find a business with a P/E of 12, then you are buying this business at a deep discount, a genuine valuation pearl, right? Not!

There is a reason behind why a business has a P/E less than a sector average, institutional investors don't like it as much as they love other companies within the industry.

Nearly all valuation entry points involve purchasing a company that is within a downtrend. Hence, most value investors buy low and sell even lower.

Never purchase a stock that is within a downtrend no matter how low the P/E ratio is.

3 - Cling to a losing trade until it eventually comes back. This is the cerebral retard stratagem. Traders that do this have no business investing in the stock market. Their akin to that monkey which grabs the fruit and then the trap closes on the arm. If the monkey would let go of the fruit, he could escape from the trap. But the monkey never lets go.

Time is value, it's the stuff existence is made of. Way back in March of 2000 the Nasdaq traded at 5,000. Today it trades at less than half that at 2186. So for the last 10 years, you would still be hoping for the market to come back with this strategy. These are 10 years you could have been trading and making money, eternally consumed. At just 10% a year, you could have doubled your money. But it's worse than that.

The majority of retards that use this stratagem can't do math. Let us say the Nasdaq dropped from 5,000 down to 2,500 or 50%. Most monkey retards believe if the market goes up by 50% they'll get back to break even. Not so. The market would have to go up 100% to rise back to 5,000.

Never use buy and hold on a losing trade. Cut your losses as fast as you can.

In the video below I chat a little about the illogicality that is value investing.