Don’t Be a Car Salesman: Why You Shouldn't Sell Yourself on a Trade

[Henrik Ekenberg]

Don't Be a Car Salesman: Why You Shouldn't Sell Yourself on a Trade

The Common Trading Trap: Self-Persuasion

Picture this: You walk onto a used car lot, and the salesman immediately bombards you with reasons why the clunky, questionable vehicle in front of you is the deal of a lifetime. It's got "character," a "rare design," and "only a few previous owners." Meanwhile, you can smell the desperation in the air.

Now, imagine that you are that salesman, and the car is your latest trade idea.

Traders often talk themselves into buying stocks that don't actually deserve their money. Instead of objectively assessing the trade, they start making excuses to justify their decision. It's a classic case of confirmation bias—the tendency to seek out information that supports what you want to believe while ignoring evidence to the contrary.

The Better Approach: Be a Car Buyer, Not a Car Seller

Instead of selling yourself on a trade, flip the mindset. Be the skeptical car buyer, not the eager salesman. When evaluating a stock, don't list reasons why it's a great buy. Instead, find every possible reason why it isn't worth your money. If, after that analysis, it still makes sense, then—and only then—should you consider making the trade.

Here's how to shift your perspective:

• Inspect Under the Hood – Don't just glance at the stock's recent performance; dig deeper into fundamentals, earnings reports, and broader market trends.
  
• Look for Hidden Rust – Check for red flags like excessive debt, declining revenue, or weak management.
  
• Test Drive in Different Conditions – How does the stock perform in different market environments? Is it volatile? Does it struggle when the market turns south?
  
• Compare It to Other Models – Are there better stocks in the same sector? If your stock is the financial equivalent of a 1998 minivan with a cracked windshield, maybe it's time to consider another option.
  

The Risk of Being Your Own Salesman

When traders become their own hype men, they take on trades based on emotion rather than logic. That's how portfolios end up filled with underperforming stocks that should have been avoided in the first place. Successful traders act like discerning buyers—they make sure every trade has a valid reason to exist in their portfolio before they commit.

So next time you catch yourself giving a sales pitch in your head about why a stock is definitely going to the moon, take a step back. Kick the tires. Look under the hood. And most importantly—ask yourself, Would I actually buy this, or am I just selling it to myself?