I still remember when I entered the stock market in 2002 and started trading, I made some series of mistakes which cost me huge money back then. There weren’t enough resources then to learn from and these are real life experiences which you can ignore at your own peril…
Stock Market Traders make several mistakes, Its ok to make some mistakes but you have got to learn from mistakes, not only yours but from other mistakes too… and that is how I have learned…
1 OVER DEPENDING ON MEDIA
Traders use media like news papers, tv channels, and now a days soliciated and unsolicited whats app messages or many such channels. Traders forget that the media is for information and it can't be your trading plan. If any idea entices you, check it, study it, get it authenticated and take advice from your investment advisor. Trading on just information can sometimes cost you big money.
2 WITHOUT TRADING PLAN
Trading with plan is like starting a Building Construction with blue print. How can you start building your Financial Empire without having a Trading Plan. If you don't have trading plan then no matter how many years you put in to market, you can't move a brick.
3 TRADING WITH BORROWED FUNDS
This is not a mistake but a blunder most of the traders commit. Borrowed funds come with interest part and remeber interest cycles runs through 24 hours and you trade only for 6 hours so if you are unable to rotate your funds in a way which can cover the interest portion & just incase you lose the borrowed funds in market it can be a double whammy. So be cautious...
4 FOLLOWING HERD
This is very common, Traders follow somebody blindly it can be a stock, friend, tips, the entire market it can be any thing. This is herd mentality when you dont know how and whom you are following because the other guy must be following somebody and how soon or late you are getting the information which you are relying on. Quick check : Try to see if you are in euphoria, it will save you...
5 OVER CONFIDENCE
Traders / Investors get over confident after few wins and they bet big money in some stock or idea or may be penny stock. Mind me its not a good strategy. Keep your risks in check. Despite you are winning for the past thousand trades.
6 AVOIDING LOSSES
Don't ever do this, There are two reasons people do whatever they do when they trade
1. To make money
2. To not to lose money
the first is ok, but when you try to not to lose or avoid losses, it may be a case when you are avoiding small losses but inviting even bigger losses. So Accept the losses & move to the next trade with same precision.
7 INVESTING MORE AFTER STRONG PERFORMANCE
Some times trader bet big money after they see strong performace it can be their own performance, market performance. This is risky because you might end up entering at quite a lot Inflated levels as the markets have already moved ahead... Check this if the levels are inflated and are you risking much.
8 OVER LEVERAGE
Leveraging means taking positions greater than your funds availability. Leveraging may sometimes be a boon if you know when you are entering in to markets and you studied markets well. But if you haven't then it can wipe your capital in multiples of your position size. Defining risk and leverage may help.
9 RESEARCHING AFTER INVESTING
This is also very common among the novice of semi-novice traders, they take positions and when they get stuck, research begins. It's like first you order product online may be form amazon and then you look out for the reviews, product specifications etc. right? you don't do so in online shopping, then why in trading?
10 TRADING WITHOUT LEARNING
It takes you 15 yrs of graduation and 2-5 years of specialization if you want to be a doctor or CA or even engineer. How can you think you can start trading without any studies. Learn from experienced traders, coaches, have mentors, there are plenty of them.