Every stock market trader is very likely to commit mistakes. Game of stock market is a serious business and must be done with extra cautious. Few common mistakes are listed below that could eat your investments and you must avoid them in all circumstances.
1) Trading with money you cannot afford to lose- this is the top mistake made by a lot of traders. Someone has said correctly that you cannot win unless you have money that you could afford to lose. A lot of traders invest and trade with the money which they can't afford to lose. It may be due to any reason (may be greed) but playing with your sacred money could be really dangerous and could put you in financial troubles. Trading with money that you can't afford to lose would ultimately create a panic around you and you won't be able to trade with peace of mind. And in such condition you would actually trade out of fear and emotions. Such trades are never successful.
2) Spending profits before you earn them- it is a major problem with the traders that they start spending money after watching their stocks moving high. You must be sure that you work according to the current market position. Daydreaming about hike of share would actually let you spend more. One could not expect how long the prices will move up. Really, this market is very sensitive and no one could predict what could happen next minute. Therefore, you must be clear that you will sell your position on time without expecting too much. Market would not go according to your expectations, rather you must watch out carefully that how much it will go up and trade accordingly.
3) Forming an opinion- never ever form an opinion about stock market or never get into an opinion formed by even a stock market guru. Just move with reality. However, as far as an opinion is concerned about the market direction of a long term investment, it may go correct but forming an opinion for market direction for a short term position is simply foolishness. You are not the only trader whose opinion would run the market. Everyone has his own opinion and of course, market can't be run on every opinion therefore smart move is not to form an opinion.
4) Changing your, trading plan / strategy- many traders change their plan or strategy at tines when they find the market going against what they thought for. However, this practice is nothing more than a poison for your, trading career. Doing this would never give you an idea about a certain plan which is working for you. So, your plan must be rigid and must not be changed unless you are confirmed that it is working completely opposite every time. You must ensure not to change your methodology just because of few loses. Unless you find a solid reason to change your plan, never change it.
5) Not setting a stop loss point- some traders do not know when to come out of trade. Even if they are facing a bad trade, they pray and hope that their position return to normal. Such things are never going to work. Market is never wrong, it is you going or thinking wrong. So, face the reality, escape the trade which is bad for you. Maintain a stop loss point which would guide you to exit a trade after a certain limit.
6) Play with real data and not with hope, pray and wish- many stock traders always hope, pray and wish that their position rise up on charts. Avoid such mistakes. Market is not going to hear what you pray and answer your wishes. Be wise and smart. Trade with the real data of market.
The points stated above are the most common mistakes investors and traders commit. Whatever type of trading you are involved in, avoiding these mistakes would help you a lot. There are few common mistakes that every trader does. Doing any or few of them could cost a lot. So, traders must beware of them.
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