In this article, we’ll tell you about Common Mistakes to avoid while trading in stock market and how you can avoid them. By ignoring these common mistakes, you have a higher chance or more chance chances for making money or profit in the stock market with patience.
We all hope to make money or make a passive income through the stock market trading and many people start trading, but only a few persist over the long term. The main reason for this is making mistakes and not understanding them in time.
Why is it important to control emotions in the stock market?
The most difficult and hard challenge in trading is controlling your own emotions like when to trade. When stocks rise rapidly, greed arises, and when they fall, fear emerges. This fear and greed lead people to make poor decisions, such as selling too soon or investing more money than necessary.
A good trader is one who acts based on logic and planning, not emotions. In the stock market, only a person who thinks with a cool head achieves long-term profits. if you trade based on the emotions so you have much higher chances of loosing that’s why many traders are also shifting to algo trading.
Why is “patience” the greatest strength in trading?
Many people think that money will come immediately from the stock market but in reality, success in trading is achieved gradually and slowly. The right trade takes a lot of time, patience and experience to happen, its your hardwork behind it. But if you continue trading every day without being impatient, the chances of making mistakes increase. That’s why it’s very important to be patient and identify the right opportunity. Patience is the quality that turns an ordinary trader into a professional trader.
Common Mistakes to avoid
1. Starting Trading Without Learning
- Many people think that buying stocks is easy: download an app, buy a few shares, and the money will come. But the reality is very different.
- Learning is very important to be successful in the stock market. Trading without the proper knowledge is like driving without learning how to drive. This will surely lead to an accident.
How to avoid it:
– Before you start, gain a good understanding through YouTube channels, free online courses, and demo trading. Start slowly.
2. You need to follow the market Trend as trend can be your biggest friend.
- People often buy the same stocks their friends, family, or those that are trending on social media. But everyone’s needs and strategies are different.
- If you buy stocks without taking into account the advice of others, then the possibility of loss increases.
How to avoid it:
Do your own research, learn about the company, and invest based on your knowledge.
3. Being greedy
- When a stock rises, we think it will rise even more. But sometimes the same value suddenly drops.
- Because of greed, people don’t sell stocks even when there are gains and ultimately suffer losses.
How to avoid it:
Decide your goal in advance: at what price to buy and at what price to sell. Stick with that.
4. Selling Stocks Early Out of Fear
- Sometimes, when the market drops a little, new traders panic and immediately sell their stock. Then the same value rises, and they regret it.
How to Avoid It:
Not every drop means a loss. Be patient and understand market conditions.
5. Not Using Stop Losses
- Many people buy stocks but don’t place a stop loss. When the stock drops, they don’t stop out, and the losses continue to mount.
6. Overtrading
- Some people continue buying and selling stocks throughout the day. This is called overtrading. This not only causes fatigue but also increases brokerage costs and taxes.
How to Avoid It:
Make limited, careful trades every day. Focus on quality, not quantity.
7. Credit Trading
- People often start trading by borrowing money or taking out a loan, which involves a lot of risk. If there is a loss, it becomes difficult to repay the loan.
8. Never Invest all your entire capital in to a single share or a single stock
- People often make the mistake of “putting all your eggs in one basket,” that is, investing all your money in a single stock. If there is a loss in that one stock, the whole thing can go belly up.
How to avoid it:
Divide your portfolio into different stocks. This reduces risk.
9. Rushing to recover old losses
- When a loss occurs, people rush back into trading to cover the previous loss. But doing so makes a new mistake.
10. Trading at the Wrong Time
- Some people trade just after the market opens or just before it closes, when volatility is highest.
How to Avoid It:
The hours between 9:15 and 10:30 a.m. and between 1:30 and 2:30 p.m. are considered best. It’s good to trade during this time.
