Overtrading

A common mistake for stock market investors is overtrading. Learning to sit and wait is one of the biggest challenges for many.

Jesse Livermore, one of the world's greatest investors, said: "It is never your thinking that makes big money. It's the sitting."

Stocks stair-step their way higher by breaking out of basing patterns, running up and then forming new bases from which they break out. Savvy investors learn how to hang on to leading stocks that go through normal pullbacks rather than sell them.

Beginning investors are often shaken out of winning stocks because they buy incorrectly. You can avoid that by buying a stock within 5% of its buy point in a sound base. Studies of past winners show that stocks breaking out of sound bases on heavy volume rarely retreat more than 8% from the proper buy point.

So buying right will let you sit longer with winners.