How does anyone lose money trading? Just buy and then wait until the price goes up, then sell. How can u lose?

Question

I am COMPLETELY new to trading, just learning, so here's your chance to make me look stupid... If you buy a stock at a random time/price, it WILL eventually go higher in price, right? So you just wait until it does and then sell. How does anyone lose money?

Answer 1

the stock can go south too,

investing in stock market is just the same like investing in property and business, sometime you made profit sometime you lose, if you can manage to lose just a little and made profit more than what you're lossing than you are fine...

Answer 2

You got some good answers here. Here is another example, as good as Enron:

Bear Stearns!

Investors went to sleep on a cold March Friday night in 2008, thinking their stock was worth $40.00 per share. Monday morning, after the Fed intervention over the weekend, there was an offer by JP Morgan Chase to pay out $2.00 per share-- later raised slightly. You need to read and educate yourself, and paper trade. Learn about the Tech Bubble on NASDAQ in 2000,2001. Nasdaq has not recovered, yet...

Some companies increase, some decrease, and some investors watch their investments evaporate into thin air. Even good companies can get beaten down. Some never recover.

Answer 3

If you really think that way, then you will be most surprised when you start trading - MOST surprised!

You also better make sure you do not use margin, because when a margin call hits, you have to put in more money or your broker sells the stock for you , regardless of profit or los

Answer 4

google Enron

Answer 5

Your question may be relevant if, instead of a specific stock, you buy a broad index (S&P for example).

Buying a random stock at a random time makes you exposed to tremendous risk, since any one specific company is not far from bankruptcy or at least a serious reduction of its profit generating abilities (Bear Sterns, GM, many small tech companies that went bust ...).

To put it simply, to some extent the price of a stock reflect the future profits of the company. An increase in the price of a company in the long-run means that the company is becoming more profitable, something that you cannot confidently say about all and any random company.

Having said that, even smart people who do their homework researching and analyzing stocks and using leverage can rarely beat the market over an extended period of time (beat the market means that you generate more money than you would have otherwise made if you just put your money in a fund (SPY for example)).

In fact, even investing in an fund or broad index does not guarantee you will make money over the long-run. For example, if you bought DJIA index at the beginning of 2000 you would have made less than 10%, which is a real loss if you take inflation into consideration, and you would have made a 40% loss if you invested in NASDAQ over the same period. You would have lost about 40% if you invested in NIKKEI (japan index) in 1990.

I believe that if people were aware of the amount of risk they take in investing in stock, a lot of them will just give it up.

Answer 6

Oh ask someone who was long Bear Stearns Corp in February, 2008!   No, a stock will not eventually go higher.  If you wait 10 years for a stock to realize a gain, you have suffered a great opportunity cost.  I lose on about half my trades and have been doing this for 30 plus years.  I have never met a pro who has not lost money.   No one can beat a market that is a broad correction.  I think Jim Cramer would tell you that.  Or Mr. Buffett who lost a lot money by skipping the tech boom in the 1990s.

Answer 7

stocks also go down... they can even take a serious dive!

Answer 8

It's very easy to loose money trading. and most people that trade without knowing what they are doing will usually loose money,

If you buy a stock, and the stock does not move up is a short period of time, you are an investor NOT a trader.

Not all will "eventually go higher".

You can buy a stock, and there's a possiblity that the company looses money and it will take years for it to come back, the company could have legal problems, or have bad products all of which could cause the stock to go down and never come back -  look up Enron

No investor wants to wait years for the stock to come back and they may eventually make a profit, this is not sound investing.   A trader does not want to wait more than three months for a stock to make a profit,

You do have a lot to learn, Here's some books for you to read

What Works on Wall Street by James O'Shaunessey

Beating the Street by Peter Lynch

One Up on Wall Street by Peter Lynch

The Warren Buffett Way by Robert Hagstrom

How to Make Money in Stocks” by William O’Neil

study well and you'll learn to invest better