Trading mistakes to avoid
Trading mistakes happen to each and every one of us. You might have heard the phrase “Stock markets are a guaranteed way of making profits/money.” But how can someone say this and is it really true? This is a question on everyone’s mind. Easy – all a person has to do is to invest in a good stock and hold it for a long term. No person following this would have ever lost money over a period of 10-20 years. Now just go and find the person who has done that. Maybe 10-15% of the people would have done that rest 85 – 90% would have ended up losing money.
How does this happen? Primarily because they fall into the same old fashion of emotional trauma of “Buying High and Selling Low.” A human tendency of always being a winner is also the reason for the same. At the most euphoric time of the bull market they end up buying stocks and in the most painful times (generally the end of bear markets) people end up selling stocks and losing money out of frustration. In fact after their sell-off, it could be the last leg of a bear market and a start of a new bull market.
Fear is a stronger emotion than greed
The torture of losing money over a period of time (week, month, and year) could even wear down the most determined trader. The threshold of level of a common or average investor is much lower than a determined buyer. Moreover people even end up losing money in a very strong and prominent bull market.
Trading mistakes to avoid
Some of the common mistakes traders do:
- Not ready to take losses
- Bottom fishing
- Over betting a sector / stock
- Averaging down
- Falling in love with the stock
- Blindly following
- Over trading
- Panic a lot and being impatient
- Relying on others
- Trading without any plans and changing very often
- “Get Rich Over-Night” thinking
- High ego
- HOPE – WISH – FEAR – PRAY cycle
- Day dreaming on profits
- Lack of focus
- Not being open to new ideas
Qualities that make a good trader
Let us find some rules / ways of becoming a better day trader or investor in the market
- Independent thinkers
- Strong analysts
- Active learners
- Handy with many tools of the trade
An informed trader or investor will generally be a profit-maker. Staying informed about different types of strategies, analysis is crucial. Most importantly he is able to learn from his trading mistakes. Trust your research without going over confident and that will pay off.
Following these kinds of some rules and not repeating these trading mistakes would put you in a different position. It would put you in a profitable position during these challenging and ever-changing markets that can be rewarding.