The Most Common mistakes made by Investors in Stock Trading
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Looking into any field you can see two types of people. One is successful people and the other is unsuccessful. Actually, what is the difference between the two? Successful people are willing to do all the things what others are unwilling to do. But in any field anyone can made mistakes. Even in your day to day life you made many mistakes. So no matter, whether you are a small investor, inexperienced beginners or smart professionals. There is chance to made mistakes. And they lose money. You just have to do is “Build up your weaknesses until they become your strong points”.
“Concentrate on your strengths, not your weaknesses” This is the logic. Successful traders are risk takers not large risk but less risk. 98% of all investors make mistakes because they don’t spend enough time in live market to learn where they made mistakes in trading stocks. You remain in a belief that you know everything. Stop thinking in this way, and try to learn something new and enhanced rules to use in future. There are 21 common mistakes that most of the investors make. By avoiding these common mistakes success in the market can be achieved. If you serious once and expect better investment result avoid the following key mistakes.
- Persistently holding onto your losses when they are very small and reasonable
All investors are human beings. Emotions will play game. The problem is most of the investors don’t want to exit with small profit and small loss. They wait for large profit and large loss as well. That means, if the stock price falls below your purchased price more than 7 % or 8%. You wait again with a hope that stock price may rise again without accepting that small lose. So learn to accept a simple rule cut all your losses immediately when the stock price drops below 7% or 8%. So you can capitalize on the outstanding opportunities in the future.
- Buying stock in down in price, this leads to unhappy results
When the stock price become cheaper than few months before it seems like a real bargain. But this is a foolish action. The price would not move in your expected direction after you were purchasing it.
- When buying averaging down your price rather than averaging up
If you buy stock at 2563, average it down to 2242 and buy more at 1922. This way you can avoid huge losses in future.
- Not believe in charts and stay afraid to buy stocks
When the stock come forward from a price consolidation or base area of at least 7 or 8 weeks it was the best time to buy stock in the bull market.
- Never follow poor selection criteria and never getting out of the starting gate properly and not know how to select better company
It is necessary you to understand the crucial fundamental factors for a proper selection of stocks. Don’t give overly concentration on highly speculative, lower-quality, or risky technology securities.
- Not having a particular general market rules for identifying market correction or when market decline occur and when a new uptrend is confirmed
You must develop certain rules and follow them thoroughly. It is essential to recognize market highs and major market turnarounds coming off the bottom. So that you can avoid significant losses and can achieve enough profit.
- Not following your buy and sell rules, this will result you to make increased number of mistakes
The specific rules that you create are of no use if you don’t keep discipline in market with your developed rules and game plans. So develop a discipline in making decision and taking action according to your historically proven rules.
- Give maximum effort to buy stock and after that not understand when or under what condition it must be sold
Does full homework never stop after half work. Give equal importance to both entry and exit position.
- Lack of awareness of using charts to improve selection of stocks and timing
- Buying more shares of low-priced stocks rather than fewer shares of higher-priced stocks
Many people think that it is better to buy large amount of low-priced stocks rather than fewer shares of higher-priced stocks. But its sound wired. The most useful way is to buy some good quality stocks of higher price besides of buying lots of lower valued price stocks. Also low-priced stocks may cost more in commission and markups.
- Buying on tips, rumors, split announcements, and TV news
Most of the traders are willing to risk their hard-earned money by hearing someone else words. The result is losing a lot of money. The real fact is most tips and news you hear simply aren’t true. Even if it is true, in lots of cases the stock concerned will paradoxically go down, rather than up to your assumed level.
- Selecting stocks with low P/E ratios
The common mistakes done by most of the traders are pay attention to dividends and P/E ratio rather than earning per share growth. Do you hear any better performing companies pay dividends and have low P/E ratio? So be careful about this.
- Without ding the necessary preparation, wanting to make quick and fast buck
Here the chance is to jump fast into a stock and stuck there and slow to cut losses when you are wrong.
- Buying old names you are familiar with
Just because you are familiar with a stock, it doesn’t necessarily mean that it is a good stock to buy. With a little research, you could recover new names that give you good profit.
- Fail to recognize good information and advices
Certain stockbrokers and advisory services give you lots of advice. Most of the traders failed to recognize good information and advice. Also avoid the use of excessive borrowed money.
- Excessive worrying about taxes and commissions
- Focusing mainly on Short-term, lower-priced options
- Not being able to take proper decisions on right time
Most people don’t have a proper guideline for their trading. They don’t know where to sell, hold and buy. You must follow a proven plan and a set of strict principles or buy and sell rules. In this way you’re being able to make up your mind when a decision needs to be made.
- Random selection of stocks
Many people pick some favorite stock and relying on hope and their opinion. This is not the right approach towards market. Pay attention to the market like successful people were doing. Only sound principles and methods can give you sound results.
After reading all these, don’t feel bad. Keep this thing in your mind “Build up your weaknesses until they become your strong points.” It is not a sudden process. It will take certain time. But, at the end you will get back its worth every minute you spend on it. Set up a proper strategy and learn to invest with knowledge and confidence to protect your money.
Some good reads
- What mean by Trailing Stop Loss, how it will help the trader to reduce The risk in Trading MCX, NSE, FOREX Markets?
- Do you want to make Profit in both Bull and Bear market? The secret is here, for you.
- Follow a good trading plan to reduce the risk in Trading
- Vast areas of trading options for traders to choose and make profit