Everyday many people enters in to the share market with a lot of expectations of making a huge money in less time. People generally thinks that share market is all about making a lot of money in less time with low investments. And entering in this world with such a wrong expectations leads to a big mistake for the investors. Though it is understood that making a mistake is a part of learning but, learning at such a high risk it’s really a chapter of worry. So, before entering into the market it is very necessary to learn that how to do trading in share market.
As there are many mistakes which a traders usually makes day-in day-out. But after a deep study of many mistakes we are here with few of them which a traders commonly makes.
1. Not calculating the RRR (Risk- Reward Ratio):
Many traders do not calculate the risk-reward ratio of their capital & also does not calculate the risk -reward ratio of the stocks before placing the orders/trade. Before establishing a position in stock market you have to be prepare with your Risk-Reward Ratio.
2. Failure to implement stop loss orders:
Without a Stop Loss only one trade of yours can wipe all your profits and substantial amount of capital as well. Always follow your Stop Loss. Once your stop loss is hits it indicates that it’s a time for you to take your loss & get out of the trade.
3. Not Having a Trading Plan or Not trade as per plan:
New traders, they do not plan any trading strategy for the next day, they just jump in the market without any trading plans. It is harmful for traders to dive in the market without doing a homework. Your plans should outline your risk management rules. It should also outline exactly how will you enter and exit trades in both win and lose situation.
4. Averaging Down (or Up) to Redeem a Losing Position:
Adding to a losing trade is a dangerous practice. The price can move against you for much longer than you expect, as your loss gets exponentially larger.
5. Changing your trading strategy after losing some trade:
Losing is unavoidable and even the best traders will regularly realize losses. Changing your approach after a few losing traders sets you back on the learning curve. Stick to your approach, every losing streak will end.
6. Not using a trading Journal:
One of the surest signs that you do not have a future as a trader is when you do not have a trading journal and claim that you do not need one.
7. Trade based on your Gut:
This is a similar mistake for new traders. When a gut feeling is your only reason for entering a trade, that’s one of the trading mistakes too many people make while trading. First learn how to read charts , learn to follow trend lines. Learn from your mistakes by keeping trading records.
8. Try to anticipate the news:
Often the price will move in both directions, sharply and quickly, before picking a sustained direction. That means you will likely be in a big losing trade within seconds of the news release. So anticipating a news plays a very important role in stock market.
9. Shirking Homework:
When we make profits , we reduce our homework which creates overconfidence & makes us desperate to participate in loose trades. Homework was not only important in school but it is equally or more important in the market.
10. Start trading without Knowledge:
Most of the beginners enter the share market with zero knowledge. This is the common mistake made by the traders. Without knowledge you can not make profit and people (firms) make you fool. And you always make decisions based on other news channels & others opinions. Without knowledge you guys can not raise your win trade.
11. Overconfidence after a profit:
When a new trader made his first profit in the share market then they feel that they have superior skill and also felt that nothing will go wrong. It is overconfident. Overconfidence is risky for traders because they believe that they predict the market movement; it is not possible for anyone to predict the perfect market movement, not you, nor me or any professional Institute.
12. Follow Others Instructions:
When beginners start their career in the share market they follow their friends opinion, other brokerage firms instructions or news channels. This is the reason new traders lose their money.
Also Read | 8 Mistakes That Destroy Investors Returns
