Ten common trading mistakes and ways to avoid them
Everyone wants to make money. Although there are many ways, trading is the first thing that comes in everyone’s mind. It may seem simple, but it is not. In the beginning, traders make a lot of mistakes which can lead to a considerable loss. I started trading a couple of months ago. Here are some of the errors I reversed to stop losing money in the volatile market.
1. Start Without Learning
Most people start trading without a basic understanding of the stock market and economy. It could be dangerous since you can be struck at any point in time, and due to lack of knowledge, you won’t be able to handle the situation. Also, in the long run, to become a successful trader, it is very, very important to have a good understanding of the concepts.
“Lean, learn, learn”
2. Do not Follow the News
The market can change its direction anytime based on a piece of News or just rumour in the middle of trading hours. It is crucial to stay up-to-date. Every trader must follow the News the whole time they trade. It is also essential to develop the day’s trading strategy based on the News. The best way to do is to wake up early before the trading hours and go through the entire report about the market. Newspapers, mobile apps and tv news channels could be the best source of keeping up-to-date with the trend.
3. Borrow Money
In the excitement of earning money, people tend to take loans which could be harmful since the chances of losing money are comparatively high in the starting. As a result, people tend to make more mistakes. If you don’t have the money, start with the virtual trading. Once you have developed the skill, you can begin to trade with a small amount of money.
“Start with small”
4. Not Understanding Margins
Margins are for traders to maximise their profits by allowing them to trade in the multiples of the amount they have in their trading account. Although margins maximise profits, they also increase the losses. The best way to avoid the losses is to take the calculated risk.
“Take calculated risk”
5. No Stop Loss
Stop loss, as the name suggests, helps in minimising the losses. It can be set at the time of placing the order, and as the price crosses the value, your current position automatically gets squared off. It is beneficial, especially in a more volatile market. If you do not want to lose a lot of money, Never trade without a stop loss.
“Always trade with strict stop loss”
6. Trade Against the Trend
The trend is your most significant friend while trading. As everyone says never trade against the trend as chances of losing money is higher. Trading against the trend is difficult due to extended stop losses and short targets.
“Never trade against the trend”
7. Trade only in Free Time
Most traders only trade in their free time, but it is crucial to watch the market for the entire duration of market trading hours. The trader has to wait for the right time to both enter and exit the position; the small delay or urgency could be very risky in the market.
“Give trading your full-time”
8. No Techincal Indicators
Technical indicators are a must for trading. Some traders use multiple indicators for the second opinion. They seem simple, but they are much difficult to use a live trading session. The best way is to learn numerous indicators and use them in a virtual environment first, select your favourite one and then use them with real money.
“Trade based on multiple technical indicators”
9. Greed and Fear
Neither greed nor fear is suitable for traders. Excess of both these will lead to impulsive decisions which might end up with substantial losses. Always trust technical assessment over human bias.
“Try to minimiaze human bias”
Always respect the market and accept your defeat. Being stubborn at time of loss can lead to crisis. Your strategy that worked one day might not work on another. Be rational while making decisions.
“Always respect the market”
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