I'm sure every person you've ever talked to about trading stocks has told you this piece of information, but nobody follows this rule, and I'm going to explain to you why. You need to be going against the grain with your trading. You don't want to be buying a stock when everybody else is piling into it. That is called the herd mentality.
In my ebook, I talk about how there's three types of people who trade out there. There's people who make bearish investments, those are people who are betting on the stock to go down, and they make money from falling stock prices. There's bullish investors who are betting on the stock to go up, and they make money from rising stock prices.
For the most part, that's where the majority of people are trading, and then there are the sheep, and the sheep follow the herd, being led by other people because they don't have the confidence to make decisions themselves and they get slaughtered by the market. The stock market is unforgiving, it's true. It really is, it can make you or it can break you, there is no forgiveness when it comes to trading stocks. So if you go online and you do what I did where I was going online and watching what stock was way the hell up, it was flying, the sky's the limit with this stock.
You got people on the news just talking about this stock left and right, everyone's piling into it, I was like, I can't lose, I better get into this stock while it's up. You want, your mind tells you you want to get into a good thing, and we see a stock in decline almost as a sick stock, and you can't look at it that way. You want to buy low. You want to buy that stock when everybody else is selling. You want to be seeing people on the news saying "get rid of this stock."
I mean, within reason, if you see other reasons to buy that stock. It's not like you just want to go out there and buy a loser stock, you want to do your research and understand why this stock is going down in value, but you don't want to buy stocks that are sky high. They're gonna come down. It's all hype. You don't want to buy stocks based on hype. You're going to end up losing a lot of money that way.
I can't tell you how many stocks I bought based on what I saw on the news. I know one of them, like I said, I bought a jewelry company, I bought Signet Jewelers and for some reason, I read an article on seeking alpha or one of those trading sites that was like, this stock has unlimited potential, we can see this stock trading 10% above where it's trading in the next two months, and I was like, of course it will, it's so high right now. You know, my head was in the clouds with the stock, and unfortunately, reality set in and the stock went down and I lost money and I sold down. I bought high and I sold low, and everybody seems to understand this if you ask them how to trade stocks. They will say, if you tell them "buy low, sell high," they'll say "yeah, but give me a real piece of advice," and they don't follow this key rule. This is like the cardinal rule of trading, and I know every time I talk to people about stocks, and I give them this piece of advice, they think I'm being an asshole, but I'm not.
People don't understand this. This is the cardinal rule of trading. They think I'm mocking them, like oh, here's the tip, guys, buy low, sell high, but it is the cardinal rule of trading and you may think you understand it, but I didn't understand it, even after reading book after book, I didn't get it until I really realized what I was doing. You do it without realizing it, you buy a hot stock in the news. You don't want to do that, it's as simple as that.