Why You Should Not Trade Based on Hot Stock Tips
We are bombarded with stock tips all the time. You see financial advisors talk about stocks that are going to "make it big" and you hear tips from your friends and families on what stock is going to go up. It seems pretty exciting, like you know something that will make you rich.
But there is one problem with this. The majority of stock tips tend to fail or will even lose you money. Here are 4 reasons why you should not trade based off of stock tips.
1. Most People Don't Know What They Are Talking About
Sometimes rumors start and are exaggerated to the point where there really isn't much truth in them anymore. A lot of people will just be regurgitating the misguided information that they got. I have seen it before. Some company is changing the world and has been making their investors a killing in the past few months. But when I actually look at the stock of the company it hasn't been doing to hot compared to the rest of the market.
2. You Do Not Know Their Plan
If you see a financial advisor that actually knows what they are talking about talk about a stock that they like they might actually be giving you good information. But all that can give you is what stock they are getting into.
A successful trader will do much more then find a good quality stock. They will also figure out how to handle different situations. They will have a plan on what to do when they are wrong and they will have a plan on what to do when they are right. If all you have is the buy signal you are missing alot and will not have the same results they do.
3. Pump And Dump Schemes
Pump and dump scams happen all the time in the market. And what it is a white collar crime. People who are suppose to be trusted and considered as an authority will use that power to hype up stocks and manipulate the market for their own advantage. It is best to stay away from this.
4. It Could Get You Thrown in Jail
It is illegal to know and act on insider information. If you know something about a company that will affect the price of the stock and the general public does not know about it, well then you have committed a crime.
But there is one problem with this. The majority of stock tips tend to fail or will even lose you money. Here are 4 reasons why you should not trade based off of stock tips.
1. Most People Don't Know What They Are Talking About
Sometimes rumors start and are exaggerated to the point where there really isn't much truth in them anymore. A lot of people will just be regurgitating the misguided information that they got. I have seen it before. Some company is changing the world and has been making their investors a killing in the past few months. But when I actually look at the stock of the company it hasn't been doing to hot compared to the rest of the market.
2. You Do Not Know Their Plan
If you see a financial advisor that actually knows what they are talking about talk about a stock that they like they might actually be giving you good information. But all that can give you is what stock they are getting into.
A successful trader will do much more then find a good quality stock. They will also figure out how to handle different situations. They will have a plan on what to do when they are wrong and they will have a plan on what to do when they are right. If all you have is the buy signal you are missing alot and will not have the same results they do.
3. Pump And Dump Schemes
Pump and dump scams happen all the time in the market. And what it is a white collar crime. People who are suppose to be trusted and considered as an authority will use that power to hype up stocks and manipulate the market for their own advantage. It is best to stay away from this.
4. It Could Get You Thrown in Jail
It is illegal to know and act on insider information. If you know something about a company that will affect the price of the stock and the general public does not know about it, well then you have committed a crime.
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For more information and tips about the stock market visit Shaun's site about the Stock Market Basics
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