10 Silly Mistakes Every Stock Trader Makes: More than half of the people who invest in the share market fail. And, that’s why they suggest you not to trade in it. However, they did not spend their money in the stocks; they gambled with it.
We have seen people losing all their savings because of their silly & stupid mistake, and then blame it to the market.
A successful trader is not less than a businessman. He needs to make sound decisions, be calm in tough times, control feelings like anxiety, stress, and fear and should think logically. There are rules in stock market trading; he needs to stick to it, even if it cuts his profits a little.
And, yes! The profits here are just magnificent. You let the money work for you by being just a little smart.
Thus, next time someone tells you not to invest in stocks, ask him to be quiet! Rude but Required! Because you will not be making the mistakes, which most of them do.
So, below are ten mistakes which every loss-making stock trader has made, and you must avoid.
10 Must Avoid Stock Trader Market Mistakes
1. Losing Track of Patience
Novice traders want to earn money quickly and do not want to miss anything. These traders are either too impatient or too patient when losing, about their investments. And, let me tell you, this is the most common and silliest mistake, a trader makes.
When losing, they are too patient, in the hope that a particular stock would bounce back. In this hope, they keep going in losses and losses. A successful trader should know to cut his losses.
Also, when winning, they act too impatient. Traders, in the hope of earning maximum, withdraw their investments too soon. The ideal approach should not be to withdraw from the highest point but to take a significant percentage of the overall increment.
2. Letting the Emotions Rule
Another killer of traders is their emotions. Fear, greed, anxiety, stress, and impatience are some top of them. The reason behind this is the short term approach of investors. An unsuccessful trader has its mind filled with anxiety and just keeps checking the chart so that he can sell at the maximum and buy at the lowest. However, this will not make much difference. Besides, a small mistake can cost more bucks than you earned.
It happens because most of the people are somehow emotionally attached to their money. They cannot just see losing their money and want to maximize it. Moreover, the investment market doesn’t work like that. Money is just an asset here to make more money.
3. Not Investing Enough
Most of the beginners come with a thought in the back of their mind that they would start their stock market trading empire with a small capital, thanks to the exceptional stories we have. The online stock trading advertisements and examples, we see, are not real and should be removed from your mind. The basic rule here is- You need money to make money.
Expecting more than 1-2% return daily out of your total investments is just a dream which would rarely come true. If you are a day trader and planning to make an earning out of the stock market, then you need significant capital. You just cannot make $1000/day, by investing $3000.
Wake up now!
4. Directly Starting the Game
Can you do heart surgery, if you haven’t studied it? Then, why do you expect the share market to work like that? New traders make this mistake of directly starting stock market trading without any prior knowledge. Online stock trading is a professional career and should be treated like one. It also requires a proper skill set. You need to know the terminologies, tools, techniques, strategies, study risk management, balancing the portfolio and a lot more.
Making your moves without reading and planning can cost you much more than you think. Your confidence and trust upon stock market trading would also get affected.
Most legend traders have spent months and years to understand the market before investing in it. And, as Sir Abraham Lincoln said, “If I got 5 hours to do a task, I would spend 4 hours sharpening my axe.”
It is a golden rule, note it or lose!
What worse someone can do than comparing himself, who is a beginner, with another trader, who has been here for ten years. Many traders post their online stock trading strategies and profits to make you learn from them. Many traders, after seeing those high winning profits get upset. Everybody grasps things at his own pace and in his style that a successful trader has developed it. He even knows how to handle a crash. Take your time, relax, and move slow and steadily.
Remember, to work on your strengths. It is like you are comparing your level 1 to someone’s level 10 and that is, not justified.
6. Not keeping Record
Every successful trader would have one thing in common, i.e. they all will have a record of all their past trades. No, these records are not for taxing purposes. Instead, traders learn from them.
A new trader should have two objectives. First, to make money; and second, to be better at stock market trading, day-by-day. The former aim might not be accomplished every time, but make sure the latter one is achieved.
7. Ignoring Indicators
The worst mistake or risk, any trader can make is to ignore the technical indicators. If a tool is suggesting that a stock is at its top, then you must go short in it. Failing to do so could be the most stupid thing. It generally happens if you listen to your gut feeling too much. Yes, it is good that you believe in them. However, following them and ignoring tools is not a good idea.
Remember, it might not be the gut always; it can also be greed. And, sticking to the plan and not falling for the traps is the foremost rule.
8. Not Diversifying
It is the most common point in our every article. And why should it not be? It is the most important rule to be safe in a stock market. Many traders think that diversification only reduces their profit percentage and they can earn more by investing in a particular sector! However, when the tables would turn, and that sector would face a downfall, then all your net worth would go in the water.
Therefore, it is better to invest in all kinds of industries and sectors, nature and geographically both. Because all stocks failing together is a rare situation.
Over-sizing in a trade market is when you put a large chunk of your account balance on a single purchase. One needs to understand that the market doesn’t work according to their predictions, especially beginners. A lot of factors influence the market, and we are not able to sell all of it.
Moreover, online stock trading large position sizes would make you emotionally and mentally attached to that trade. And, in the end, you’ll either withdraw profits too early or, if lost, wait for it to get back.
The ideal stock market trading percentage is around 2% of your total account balance. It should be on your mind that even if you lose this money, your daily life will not get affected.
10. Influencing by Trend
The last mistake on our list is- traders generally get influenced by trends. If any stock performs exceptionally well, then the reality is, by the time hype is created, it is already at its peak. Investing in an oversold asset would not benefit anything.
Also, it is required not to wait for any stock to come down so that you can purchase it. Fundamentally substantial shares grow, if not today, then tomorrow. Waiting for them to come down further might cost you lose some extra profits.
Therefore, don’t get influenced, do fundamental analysis.
So, these were some common mistakes which traders make. Every trader must have committed at least some of them. It is not a bad thing. The thing is to have a plan and strategy to trade and follow it in the discipline. If you want to know some of the best stock market trading strategies, then here is the best post for you.
Now, it’s time to wrap things up. Let’s conclude the article quickly.
Rounding Things Up – Stock Trader
Stock trader market surely isn’t easy. If it were, everybody would have done it. Your homework doesn’t just end here after reading these mistakes. You might think you will not commit them, but the ones who failed had also read them, for sure. The thing is our instincts change or behave differently, and especially if the money is involved.
Thus, we would still recommend new traders to start small and not flow in the prey of their feelings. And, if you make some mistakes, don’t panic; it happens. We all are humans. The important thing is to learn from them and not make them again.
Eventually, you’ll see an increase in your confidence and earnings. It is the beauty of the stock market, which most people fail to recognize.
At last, we would say,
Do not underestimate the power of consistency and determination ever.
Have a good day!