Trading in the stock market is extremely lucrative. To a growing number of people, trading is also an exciting and challenging career, that can be extremely rewarding as well. Online trading has made it look very easy, but trading poses a risk of losing your money. Quite often traders make mistakes that can be costly. Here are certain common mistakes which you should avoid to be a successful trader.
Tradingwithout a plan
You cannot grow your money on hopes and whims. Like all other vocation,successful trading requires a proper strategy. You need to form your plan by observing the market and investing small amounts. Take the help of charts and graphs to understand the situation better. Blindly following someone or some advice is not going to help as there is no best or correct approach.
There are a lot of market forecasts and predictions available but depending upon them blindly would be a folly. News trading might seem an easy way but more often it can be dangerous, especially if you are a new trader.
Expecting to get rich overnight
This is the most common expectation people have. The quicker you shed this expectation the better as this expectation will lead to trading based on fear and emotion. Most successful traders know that profit comes in the long run and losing money is as much a part as making it. They stick to their strategy without letting false expectations get the best of them. Think about minimizing your losses over the period before thinking about making a profit.
If you are a new trader then you can also start by trading in fractional shares to keep losses at a minimum. Newbies can also start with limit- orders. Limit orders guarantee the price unlike marke t orders, which don't guarantee the price. You might not find Limit orders lucrative but they can cover your losses as you get a grip of the market.
Betting on one or two stocks
Plan on how much of the capital you want to invest. Don't put too much money in a single trade as you don't know how the stock will develop. Sitting on one stock and hoping that it will compound your money falls in the daydreamer’s realm. If you do that you are submitting to market forces that are out of your control.
Another way is to trade in stocks from diverse industries. In an unsure stock market, diversification can s you have equal chances to make or lose money in a trade. It is better that you trade incrementally in a stock you are not sure of and wait for an opportunity as the stock develops.
Choosing the wrong asset
While choosing a stock, look at its performance over the last few years as well as its future expansion plans. You should also consider the performance and future of the industry or sector as it will affect the value of the stock.
Also, beware of cheap stocks or budget deals as most often these feature stocks that are difficult to sell.
Losing your calm
You might keep losing due to a fault in your strategy. You simply need to refocus, adjust or adopt a new strategy and start trading again. Market forces are mostly beyond our control and it will be wise to reposition ourselves for the long run. Changing your strategy might seem like a defeat but it is not as sometimes you have to sacrifice the battle to win the war.
Often you might have a losing streak. It is hard not to panic in a losing streak but you have to remember that this is a part of the game. Reorganize yourself and defer trading to another day but don't make a hasty decision out of panic and fear. Wait patiently to spot the market opportunity and seize upon it.
Trading is a business and you should treat it like one. You can look at trading as a hobby but if you want serious gains, then you should dedicate proper time and patience to it. Opportunities can occur anytime and if you are not watching the market then you'll miss it. As a full-time occupation, trading makes you your boss, but you should have the discipline and patience to control your emotions.
John Smith is a Digital Marketing Consultant with more than 8 years of experience in SEO, SEM, SMO, blogging, etc having wide knowledge base into content marketing.