Nine Huge Trading Mistakes This article will introduce you nine huge trading mistakes that befall experienced and novice traders. This article also offers suggestions for helping you recognize the mistakes and for avoiding and even correcting them. First mistake is fishing for bottoms. Bottom fishing — trying to catch a stock as it bottoms out — is a great way to get soaked and lose a bucketful of money. In a bear market, stocks get much cheaper than most of us ever expect or want. They won't stop falling until they've run out of gas. Signs of Bad Stock Profit is the lifeblood of a company. Of course, the opposite is true as well. The lack of profit is a sign of a company's poor financial health. Watch the earnings. Are they increasing or not? If they aren't, find out why. If the general economy is experiencing a recession, stagnant earnings are still better than robust losses — everything is relative. Types of Stocks Income stocks are those with a long and sustained record : paying high dividends. Generally, a company whose common stock falls to this category is in a fairly stable and mature industry (e.g., an electric utility company). These companies normally pay out a relatively high percentage of corporate earnings as dividends to common stockholders. Because these companies distribute (rather than reinvest) their earnings, their stocks are less likely to experience substantial capital appreciation. Signals of A Stock Price Increase If a company earned $1 per share for the past three years and its earnings are now $1.20 per share (a 20 percent increase), consider this increase a positive harbinger. As the saying goes, "Earnings drive the market," so you need to pay attention to the company's profitability. The more a company makes, the greater the chance that its stock price will increase.