If you know the most common mistakes and bad habits that are picked up in the world of investing, it is possible to avoid them.

1. “Hot Tips”
The first rule to investing is to make your own educated decisions based on the given information. Do not rely on other people or analysts to arrive at a decision.

2. Investing with debt
Do NOT under any circumstances begin to invest if you are in debt.

3. All the eggs in one basket
This is the biggest mistake because without diversification, your losses can get out of hand. Diversification helps lower your risk by offsetting your loser with winners and increases your chances of picking a ten fold winner..

4. Greed
This is probably the worst of the four because without establishing exit points for your investment, you are liable to lose what you have gained. Everyone looks at their profits as “free” money and they let it ride. This is wrong because the market gives and it can equally take away. When you enter an investment or trade, know what price you are expecting and stick to that plan. When you reach your exit point, most of the “move” has already happened. Take your profits and find another investment opportunity. There is ALWAYS another investment opportunity.

5. Admit your losers!
At first this is a very hard thing to do. You lose a sense of self-pride by admitting you are losing and you “hope” for the price to rise back up. The word “hope” is not in the investing dictionary. Whenever you say this word, you should immediately exit the position because your investment is obviously not doing what you predicted. The majority of very successful investors are only right 50% of the time, but they make money because they admit a loser quickly. Find a better investment.

6. Emotions
Leave your emotions at the door when you begin to trade because they will greatly affect your decisions. There is no room for emotions as a trader or investor. Instead, you have to literally act as a machine when making decisions.

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