A huge part of successful investing comes from mastering the mind and thus, the thoughts. The psych of a person is complex, and probably, that’s why we, as humans, can innovate. But with this advantage, there comes one disadvantage of making mistakes, which is common and okay. When it comes to trading mistakes, there’s a long list on the internet already available. However, with time, new problems are coming out among investors that no one talks about.
Here, in this article, we would list the Top Stock Trading mistakes in context to recent times. The errors are useful for both professionals and novice traders.
Most Common Stock Trading Mistakes
Stock Trading Mistake #1
Don’t Look for the Perfect Setup: Many traders, whether novice or professional, waste their time looking for a perfect entry/exit point and thus, end up having nothing in their pockets. There can be a high probability setup, i.e. which has an accuracy of 80+%, but nothing as perfect buying/selling points exists in the market.
Stock Trading Mistake #2
Don’t Copy Others: One common problem with beginners is getting fascinated by stock market gurus, their trading style, and portfolio, and trying to replicate them. However, all this is nothing more than a marketing strategy of market leaders and operators to attract more clients and traders in the market.
The biggest reason behind it is – only success stories of these trading legends are made public. They, in their starting days, must have made some vast blunders but no one talks about it. The gist is that the market needs some role models to attract people, and these traders serve this need.
However, this doesn’t mean that you should not enter the market. Use your analysis and tools to determine the entry & exit points.
Stock Trading Mistake #3
Lowest & Highest Price Points: Another big mistake or misconception among new traders is looking for the extreme low or high during their trading sessions. However, it’s a fact that no trader can correctly spot the lowest or highest price points but only near low or near high points (>80% accuracy).
Stock Trading Mistake #4
Sure Shot Calls: There’s a new trend in the market to sell the predicted calls to the novice investors in exchange for a small amount, and many are even falling for them. Many websites & groups on social media claim 100% sure shot calls. But the fact is the stock market is an uncertain trading place, and nobody can forecast the price points in advance. The most common sources of these are internet, news channels, and social media sites.
People fail to realise that it could be a marketing stunt in favour of a significant market player and get fascinated by the calls.
Stock Trading Mistake #5
Not Acquiring Knowledge: Every trader in the market should have a basic understanding of the market, stocks, their working, finance, and other related matters. The mistake new traders make is entering into the market without reading and learning the gist of the trading place. Reading is a fantastic method to acquire the required knowledge through books, journals, articles, magazines, and courses. Watching videos would serve the same purpose, but the most valuable content is still on the original books written by experts.
Further, if you do not want to spend the time in all these, then the best possible course is investing in mutual funds, which are operated by funds managers. They have the needed skill & knowledge base and would handle your money in a better way. It indeed would require sufficient time to understand the trading styles, factors, market, and price analysis. Instead of suffering losses, it is better to pay some commission to the managers.
Stock Trading Mistake #6
Not Practising: Traders and investors should understand that practising trades is as much important as reading or learning about the market. No book, course, or guide would be able to help you make a professional, and the only experience would do the work. There are several sites and brokers in the market, like TradedWell, that offer a free demo account to new users with virtual currency. The account aids greatly in practice which further helps in spotting the preliminary mistakes and understanding the style & method which works for you.
The mistakes which would have cost you money would be corrected during the practice, and if analysed, you would know the best combination of indicators, tools, and signals that lets you profit.
Stock Trading Mistake #7
Irrelevant Material: Another mistake among traders is reading, watching, and learning from irrelevant content. An investor needs to understand that many old & popular books and write-ups have no relevance in today’s market. The content was developed in a different scenario, and you might be in a different one. For example, the trading book on the U.S. market would not be much influential in the U.K.
Similarly, the books written in the 90s or 80s witnessed different environments and would not apply today. However, it doesn’t mean all the content is irrelevant but read the relevant one.
Stock Trading Mistake #8
F.O.M.O. Trading: F.O.M.O. or fear of missing out kind of trading is hugely common among losing traders and makes investors think: this is that ‘One’ trade. A traders’ psych becomes that this trade looks good, wouldn’t come back, and thus, I can’t miss this one. Even some of the people reading it would agree that how silly it is and would yet make this mistake without realising.
The psych can make a trader two critical things – one; it can cause you to enter into every other trade even if it isn’t profitable. Second, causing to increase the position size on these trades. However, when reality hits, people end up cursing the market and not their silly moves.
Notably, you might miss some profitable trades, but you’ll not take the wrong ones.
Stock Trading Mistake #9
Choosing the Wrong Broker:
A trading website is a vital part of any investor’s life, and selecting a wrong one can cost huge money. A good broker is helpful & safe through its varied features such as useful tools, research content, education learning material, dedicated managers for advice, excellent customer service, and many more. Here are two good examples of brokerage firms:
T1Markets is a Cyprus based trading website and provides investment products and services at low cost. The firm offers products from every market type, including shares, currencies, crypto, indices, and commodities, covering more than 350 products. Further, the broker is regulated by CySEC (Cyprus Securities & Exchange Commission) and also follows policies like MiFID, E.U., and I.C.F.
The top features offered by T1Markets are free demo account, three account types, MT4 trading platform, research & educational portals, and high leverage.
HFTrading is a New Zealand headquartered investment firm that provides trading services at tight spreads. The broker doesn’t charge any commission or fee on executing trades and solely earns through its low-cost spreads. Further, there’s no charge on depositing and withdrawals as well, but some penalty in terms of inactivity fee, conversion charge, bank charges, and overnight swap fee might be applicable.
The services offers are free demo account for trial, learning material (like e-books, guides, journals, and courses), research content like earnings, economic calendar, news analysers, etc., high leverage up to 1:500, and tools that provide one-click, algorithm, Robo trading, signals, charts, real-time data, and indicators.
Both of these brokers are regulated and safe to trade. The trading websites are secured by high tech advancements like SSL and every level encryption, thus protecting account funds most possibly. Being connected with Investors Compensation Funds ensures that no broker does any fraud to clients and also insures the account balance up to 20,000 euros.
Some Final Words
So, these were all the new stock trading mistakes which every new investor must note and thus, avoid falling unto them. Notably, these mistakes are common yet unsaid by most of the websites on the internet. Bookmark the page and share it with every potential trader you know so that they can benefit.
Apart from it, make sure to avoid most common Stock Trading mistakes like not using stop losses, limit orders, over/under trading, no planning, and emotion led investing.