Six common mistakes that Beginners make in Trading
Lack of Knowledge and No Plan.
The stock market is not the place for the ill informed. But learning what you need is straightforward – you just need someone to show you the way. It is really astounding that people spend money in learning the basics of driving long before dawning the driver's seat yet set in their foot in the market without sparing a little time in ;learning the basics of trading. The fact is trading in stocks need more research and lots of immaculate planning than anything else. One needs to know lots of things about the sector, the companies and the stocks where one is putting in money. Without proper research, one is doomed to fail in the stock market.
Many novice traders expect to make a fortune by next Thursday. Or they start to write out their resignation letter before they have even placed their first trade! The stock market can be a great way to replace your current income and for creating wealth but it does require time. Not a lot, but some. Other beginners think that trading can be 100% accurate all the time. Of course this is unrealistic. Even the best of the seasoned traders have 60-75% of their trading decisions correct. But the fact is even with that margin of accuracy in decision making one can hope to earn a fortune. One should be prepared to make losses in the process if he wants to make money.
Getting in the Way
For most of the beginners, learning to tame one's emotion is an essential part of trading. When one first starts to trade it is very difficult to control emotions like fear and greed. Lack of discipline; lack of patience and over confidence are just some of the other problems that one faces.
Poor Money Management
It never ceases to amaze how many traders don't understand the critical nature of money management and the related area of risk management. This is a critical aspect of trading. If you don't get this right you not only won't be successful, you won't survive! Putting all the money in a single stock instead of having a diversified portfolio, buying stocks in a over bearish markets and retaining the stocks a bit longer in anticipation of more profits are some common mistakes that one need to avoid.
Only Trading Market in One Direction
Most new traders only learn how to trade a rising market. And very few traders know really good strategies for trading in a falling market. If one doesn't learn to trade "both" sides of the market, he is drastically limiting the number of trades he can take. And this limits the amount of money he can make.
Most traders new to trading feel they have to be in the market all the time to make any real money. And they see trading opportunities when they're not even there .In the process they end up making more transactions than they should make.This also increases the risk of making more losses. A trader should know just when to exit the market and when to enter in order to make real time money.