Apprenticed Investor: Bite Your Tongue

It's important to listen to what a stock is telling you. The long run is not an excuse for riding profitable positions all the way back down to break-even or worse. I like to use a trailing stop for these types of holdings (i.e., Altria Group (MO - Cramer's Take - Stockpickr) or Exxon Mobil (XOM - Cramer's Take - Stockpickr)) to prevent giving back all the hard-won gains.

Consider this: The employees of Lucent (LU - Cramer's Take - Stockpickr) and Enron had loaded their own 401(k)s with their respective companies' stock; they thought of themselves as good long-term investors.

3. 'I just heard on CNBC (or CNN or Bloomberg) that...'

This is the kiss of death. Every trading desk in the known universe has CNBC (and CNN or Bloomberg) on in the background. They have screamingly powerful computers and wicked-fast T3 lines. They do this all day, every day. Unless you are among the fastest of the fast, by the time something hits CNBC, it's all over but the crying.

The lower-risk/easy trade is over by the time an item hits the airwaves. The reason it's on TV in the first place is that initial move -- that's what catches the attention of the producers. By the time it hits the financial shows, the news is already "in the stock."

Savvy traders are known to short into any temporary, TV-induced pop.

My head trader is fond of an expression: "Last man in pays for beer." Chasing the latest hyped stock is a sure way to foot the bill for everyone else's drinks.

4. 'I don't want to pay capital gains taxes.'

I consider this to be the single dumbest thing ever said by any investor anywhere. Period.

I cringe each and every time I hear this shockingly ignorant statement. There is simply no worse reason to continue holding a position than to avoid taxes.