In the stock market requires a lot of patience, effort and mostly time. If the traders fails to understand the stock market, he may end up having significant losses and ruining their financial structure. Several traders jump directly to earn profit and end up on the losing side. Everybody does mistakes, and they should learn faster by analyzing them.
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Lack of Proper Planning This is the first and most basic mistake that every trader performs while entering the stock market. It is because they get excited about the market trends hoping to get more profits at the start. They do not plan and play the guessing game while trading is a wrong practice. The adverse effect of not having a proper and effective plan is that traders will not get their desired result, which will ruin their investment pattern. This will turn into greater losses if an investor does not put efforts into making a plan. On the other hand, if a trader has a well-framed plan, they will easily reap massive profits in the volatile market.
- Never, NEVER cancel a stop loss. I know, I know, every time you have a stop loss in the market, the market moves just enough to stop you out, right? Well it might mean that you should evaluate where you place your stops (this is where good trading journals come in handy), but once you’ve done your analysis and placed the trade, you need to be committed to the trade and your plan. The only adjusting you should do is to lock in your profits.
- Always have your broker or your trading desk number handy. This is really important for the day trader who is trading leveraged markets. It is easy to get a little too comfortable when your trading platform and internet connection are running smoothly, but once you drop your guard that inevitable lost connection will happen…a lost minute, even seconds could be an expensive lesson.
- Always check your open orders. This can be done a few different ways depending on your trading platform, but if your intention is to be flat in the market, always double check!
- There is a continuous flow of market news, sensitive information related to price and especially rumours that runs in the market every day. However, a trader should use this information by understanding the market and conducting proper research to gain profit.
By having experience, a trader should filter out all the rumours and carefully make decisions; otherwise, they would end up making little to no profit.
- The market will always go higher and it will always go lower. Don’t try to pick tops and bottoms on a hunch. This is where most new traders get burned.
- Don’t over-leverage yourself or have all of your money tied into one position. Keeping cash on hand is okay as a trader. These days brokers are offering extremely competitive margin requirements for day trading futures, but low margins can be a wolf in sheep’s clothing.
- Don’t trade to trade. Understand that there are 3 positions you can take as a trader: a long position, a short position and a position to NOT be in a position. There will be plenty of trading opportunities that will come along. Don’t give money to the markets simply because you are bored!
- Avoid trading a strategy without having a good understanding of how the strategy works. What is the typical winning percentage? What is the largest drawdown? In general, high winning percentage strategies have smaller average profits per trade. Lower winning percentage strategies might not have as many winners, but when you are a winner, you typically win big. If you expect your strategy to bring big profits without losses, you can also expect a check made out to “REALITY” to come your way any day.
- Don’t get cocky after a few wins. The market WILL humble you and make fools out of those with egos.
- Averaging Down Doubling down does not work for the intraday trader. I have tried it. Eighty-five percent of the time you will profit when you double down. But the 15 percent of the time you are wrong, you will get smoked. The losses during these trades will far outweigh the gains from the 85 percent. The math does not work. And I even tried to master this technique during a range-bound market where this should work best. Just forget about it. It is a waste of your mental energy to master doubling down.