Any new journey brings along with it new sets of challenges. These challenges become more difficult when it comes to Trading. Already there are a lot of misconceptions. Then, there is so much information on trading that overwhelms a newbie. Although it is a life long learning process, still, we can provide you with certain realities or truths of trading which will help you to avoid mistakes which usually new traders do.
Listed below are the mistakes most of the unsuccessful traders make:
- Blindly following the stock market Gurus: Listening to the stock market gurus on TV & then trading is a recipe for failure. Remember, TV channels are there to make money through advertisements. Your well being is the last thing in their mind. So instead of following them, do your homework & then trade accordingly.
- Believing Stock Market Tips: People tend to be an educator about every aspect of life. Don’t believe them. As the saying goes, action speaks louder than words. Check their actions rather than words. You will find numerous people giving you unsolicited market advice. Before considering any, check their stock market record. I bet, in almost all the cases, you find losers.
- Aim for unrealistic returns: Newbie traders consider trading as a place where they can double, triple their money within a short period. But once they enter the market, reality hits them hard. So keep your expectations moderate at least in the initial days. Be Patient.
- No trade management: Trade management is the process of creating a set of rules to follow while trading & then strictly adhering to them while trading. Most of the people create trading rules but either they don’t bring them into practice or the rules are not compatible with the market or their personalities.
- Gamble: Trading is not a game of chance. Trading is the process of making profits from price movements by doing proper research. So don’t gamble. Otherwise, the stock market will have to see you off very soon.
- Trading using a rearview mirror: While trading, be in present. The trades you have executed has no bearing on the next trade you will take. Whether the previous trade was a winner or loser, focus on the next trade without considering past results. Every trade is like a new cricket match. If you dwell in the past, then most probably your next trade will be driven by either fear or greed.
- Trade because it gives adrenaline rush: If you are attracted to trading because of the adrenaline rush it gives, then you are in trading for wrong purposes. Trading is an act of executing orders while keeping your emotions away. If you want an adrenaline rush, go find it somewhere else.
- Trade on excess leverage: Leverage in Trading means using borrowed money to make bets. Everyone uses leverage and certainly, it has benefits. But anything excess is harmful. The same goes for leverage. If you are excessive leveraged, one wrong bet can throw you out of the market. You may end up losing your savings.
- Excess Trading: Excessive trading, in most cases, is the result of having no plan. It only results in losses & high brokerage costs. So lay down a plan. Include how many trades will you take & under what conditions. Be meticulous while you plan.
- Trade to take revenge from the market: This is a human tendency, whenever someone hurts us, we seek revenge. When a newbie suffers loss in the stock market, he takes the loss as a pain inflicted by the market & then goes on a mission to seek revenge. But it is a fool’s idea to succeed in the stock market. With this attitude, you will only suffer losses. Accept the fact that while trading, losses are inevitable. Don’t take it personally.