If you start searching “How to be a millionaire within a few days or months by investing?”, then you will be making your first mistake in the stock marketing world. So don’t get tempted towards an article or advertisement that lures you that if you listen to them, then you will become a millionaire within a few days or months. I’m not saying it is not achievable. But remember to keep yourself in the real world to be rich.
If you are a beginner or an amateur trader and really want to make trading your career, you have to avoid some common mistakes made by novice traders. Our life is limited. So you have to learn from others’ blunders rather than making ours. Let’s dive into the article to know about these mistakes and trade like a pro.
Mistake 1: Trading Without A Plan
It is the most common mistake made by beginners. Suppose you just have started trading, and suddenly a technical aspect attracts you. On the next move, you make the trade. Do you know what will happen? Maybe you could win that trade or the next few trades. But in the end, you will lose everything.
Do not mix up trading with gambling. Instead, you should concentrate on a trading plan that contains price targets for taking profits and cutting your losses short. So, if you are prepared by having a better trading plan, you can trade in the stock market like a pro, even if the situation changes.
Mistake 2: Neglecting Stop Orders
A stop order is a method in the stock market where a stock is bought or sold at the market price once it has traded at or through a specified price known as the “stop price”. If that particular stock reaches the stop price, then it becomes a market order and is filled at the next available market price.
Generally, stop orders assist traders in taking some profits off the table or cutting potential losses in case the position starts to move against them. You should use this tactic as a novice trader while some traders bypass these orders because of their fear of “stopping out”. At the same time, another great benefit of this method is that you, being a trader, will not have to stick to the computer or other electronic gadget screen till the completion of the trade.
Mistake 3: Trading with Bad Risk/Reward Ratio
Like every other business, the probable reward in every trade should be bigger than its potential risk. There is a high possibility that if you follow this strategy, you will be on the positive side even if half of your trades are profitable. Sometimes, the beginners enter into a trade where the risk surpasses the reward. It may work out pleasantly a couple of times in the beginning, but in the long run, you will surely lose money. So, whenever you have made up your mind to make a trade, ensure to check the risk/reward ratio carefully.
Mistake 4: Failing To Reduce Losses
This mistake is related to the “Neglecting Stop Orders.” It is a general thing in stock marketing that if a trade goes the wrong way, the trader may hope for the changing course of that particular trade but fail to exit at the predetermined price as per his trading plan. As a result, the situation may get out of control, and you may incur many losses. In order to avoid this scenario, you should always be ready to cut losses at a preselected price without any hesitation.
Mistake 5: Trading with Bigger Position Size
If you are new to stock marketing, then always remember to go steady rather than copying someone else’s style and face huge losses. Often, amateur traders get greedy and put plenty of money into one trade. Moreover, as they are not prepared to see a larger amount on their computer screen, the volatility of the market makes them lose their money.
If I talk straightforwardly, stay close to your comfortable position size to prevent losses. Nevertheless, I’m not saying that you should not make progress. But, as a beginner, focus on the significant aspect of learning instead of just being hungry for making money. Go step by step, and you will soon master the art of trading. Then do your trading immensely. Last but not least, increase your position size after getting proper knowledge.
Mistake 6: Focussing on The News Excessively
News has a significant impact on the stock market. Various people listen to the news channels for doing trade in the share market. Indeed, the news channels always try to provide information on the economic reports, annual financial budget, political movements, and a wide range of other things.
Now, the point is even though we get information about stock marketing from the media, we should not only focus on them excessively. Nowadays, several media channels are in direct competition with one another. As a result, they provide much fake news just to boost their TRP. So for the betterment, never depend overly on the news. Instead, do your own research on the company profiles you want to do trading.
Mistake 7: Overlooking News
It is also an important aspect while doing trading, no matter whether you are a novice or pro trader. On one side, excessive news can degrade your trading. Similarly, if you entirely overlook or ignore the news, then you will also be making a mistake. Many beginner traders do that. So keep an eye on the media for your country’s economic updates that impact the share market.
Mistake 8: Switching Trading Strategies Frequently
Any trading strategy will take time to deliver its potential. You are not into any online poker or rummy games where you play just based on your luck. It is the real world of buying and selling stocks. In order to perform well, you have to learn a few strategies. The crucial matter is that if you cannot gain profits from trading and start switching the methods frequently, you will make a wrong move. In spite of doing it, trade a small amount of money in the beginning after carefully studying the essential aspects and must-see whether the strategy is working or not.
So if at the final step the method is not performing well, then change it. Otherwise, stick to it and study the past patterns thoroughly to make a profit.
Mistake 9: Trading Just for Fun
I have seen several people who have heard from their friends, relatives, or other people that they are earning money through stock trading and all of a sudden want to trade out of fun. My dear, it is not an entertaining sport where you want to try your luck out of joy. If you are not serious enough, you may become bankrupt. So before entering this business, be serious enough to learn and, step by step, earn money.
Mistake 10: Failing to Keep a Trading Journal
A trading journal is a great way to learn about the stock markets. Here, you can easily keep all the necessary statistics or data regarding the share market that will help you analyse what is better for you and what is not.
I know that maintaining a journal after an unsuccessful day at trading is frustrating and boring. But believe me, your tiresome work will provide you with plenty of benefits in the long run. You can effortlessly understand your strengths and weaknesses as a trader by regularly updating the journal.
I hope all of you have read my article about the “common mistakes made by beginners while trading,” where I have listed all possible mistakes or wrong moves done by novice traders. Remember that it is the real world, not a reel one like in Hollywood or Bollywood movies, where traders throw their laptops or break their desks out of frustration while trading. If your mindset is also the same, you should not do trading unless you have become calm.
On the other hand, although traders are losing money, they make trades after trades. You, being a beginner trader, stay out of this concept. Last but not least, never be emotionally attached while trading, and you will make progress gradually.