The World's Worst Teacher
I'm sure there are some pretty bad teachers out there but the stock market has to be one of the worst.
To get into "stock market school" you don't have to apply to be accepted and anyone can attend. You just open an account online, transfer in some cash and you can buy and sell with no plan, trade without stops, buy the hottest inverse or 3 times leveraged ETF, pick bottoms and tops and you might actually make money.
This is why the stock market is a horrible teacher.
The Stock Market Can Reward Bad Behavior...
The Stop Pull: Have you ever had a stop-loss in place that you pulled or ignored because you just had to allow for a "little more room"? Then, you watch the price of that stock go well below your original stop but eventually recover and move back in your favor.
I've done this and I'm sure a lot of other traders have as well. It's a slippery slope causing negative reinforcement and can become a very bad habit that will eventually cost you a lot of money.
Eventually you will pull your stop on the wrong stock, ETF, option or futures contract and get hit with a huge loss that could've easily been avoided.
I hate to use this example but what if you'd been riding the XIV train for the last few months and had a mental stop at 120 or 100 but you decide to give it a "little more room"?
The "hot tip": Your dentist, co-worker or uncle lets you in on what they claim is a great opportunity because they know someone who knows someone...You act on the tip and it works. You make money. How many more "hot tips" will you act on? How many will work and how many will fail?
The "hot tip" isn't a sound investment strategy and eventually you will lose. To succeed and survive in the long run you will need to put in the work, due diligence and create a plan. There's no free lunch.
The Stock Market Doesn't Correct Your Work, Grade Your Exams or Hold You Accountable for Behaving Badly...
You are your own worst enemy: In the privacy of your home, office or even on your smartphone, you can buy deep out of the money options, trade too many contracts for the size of your account, use all your margin to take large positions, speculate on ICOs that trade for fractions of a penny and there's no one around to stop you. You won't get sent to the principal's office and worse yet you might get lucky and make money for a short period of time.
No accountability is dangerous. Every trade can become like the next lottery ticket that gives you a chance to experience that high of winning or the gut wrenching feeling of losing money. Putting on trades allows us to experience the excitement of being in the game. Win or lose.
The stock market isn't your teacher and you are the one that has to check your work. Don't analyze your trades by how much profit you made or from how much you lost. Judge and analyze each trade on how effectively you were able to follow your plan.