It goes without saying that a newbie trader will make tons of mistakes during his initial trading ventures before getting to understand the word of stock trading with an expert’s eye. While some of these mistakes are unavoidable, a great many of them can be avoided given that the trader is familiar with the mistakes that an amateur trader often commits, and acts accordingly. As they say, you learn from your mistakes, here are some of the most common mistakes a new trader will usually tend to commit.
1. Trading without a plan
Having a trading plan is of the utmost importance. This is because trading is a highly viable and risky business, and without a well-planned strategy, one is not likely to survive through the cutthroat competitive world of stock trading. And to make a plan that works, you will need to have a thorough understanding of the financial markets which can only be had through a solid education and market experience. Trading without a proper plan is a losing proposition.
2. Trading with money they can’t afford to lose
As said, the risks and dangers involved with stock trading are many. Apparently, you indulge in trading only because you want to make money, but given the risks, one should always be prepared to face the dangers because you never know when you are going to meet with one. As such, it is advisable that you step into the world of trading with only the money that you can afford to lose. This means, you need to have a strategic plan, risk management strategies and a fair knowledge about the entire trading process before you sign up for a trading account. And do not trade with your rent money, EVER.
3. Trading without a proper education
Little knowledge is a dangerous thing. Whoever said this must have well understood the risks of trading before he set out to make such a statement. On the serious note, having no coherent knowledge of the financial market and not knowing how trading work can really put your finances in jeopardy, needless to say how far-fetched will be the word “Success” for you in stock trading.
And if you want to argue that it is the only way to learn, let me tell you that there are other better ways to learn the trade that risking all the money with this expensive one. Go to schools that provide education in trading, seek the help of a stock broker, take time to learn, and invest only the minimum.
4. Failing to cut losses short
Money is everyone’s favorite; no one likes the idea of a loss. But loss, sometimes, is unavoidable. While the older players know this for a fact, newbie traders often fall victim to their own emotions. Let me tell you here, no amount of praying, or waiting and hoping is going to bring you back your lost money; it, on the other hand, can even make you lose more. As such, you should know how to terminate a trade when the time is ripe. You don’t want losses to accumulate and mount, do you?