Where the market is flourishing or facing a downfall, a good trader knows how to make a profit in it. Even in a bear market, a good trader generates profit every day. Trading is an art that can only be learned by making mistakes. Therefore, this article is lining the three most common mistakes that investors or traders make.
- No Trading Plan: Many investors jump in with their investments without any specific investment plan. They follow the other traders or investors or invest solely based on their recent FOMO trend. All the investors talk about the opportunity in which they should have invested three to four years ago, including cryptocurrency. However, making the decision on which commodity to invest in next is a tough decision. Since no one knows the future, technical and fundamental analysis is done to predict the market’s next move. Jumping into a market, an investor must lay out an investing plan first. It will help the investor make a wise decision and hold their investment for a good future instead of making the wrong investments.
- The Problem with Stop Loss: One of the biggest mistakes an investor can make is not to put a stop loss on his trades. Whether the position is long or short, the trader must stop losing to save himself from any unpredicted situation. The trader might sometimes put the stop loss and then cancel it in the hope of seeing his portfolio grow just before it falls. Such greed destroys all the profit, snatching the capital investment of the trader too.
- Following the Herd: The most common mistake found in the new investors or traders is that they invest in holding the short positions into the stocks that have already risen to their point or are about to turn around. They don’t have a good or credible understanding of the market regarding when to invest and when to take out the investments. Experienced traders know the strategy of taking out the investments when the stock gets too crowded. However, new investors fail to realize the time when the investments should be taken out. They hold a long position instead of getting a larger amount of profit. It is always advised to invest only when the profit or the value of the stock is growing. As soon as you see a lot of crowd gathering in the pool, take it all out! That is the time when big fish in the sea move to another one.
- Wanting all of it at once: One of the biggest mistakes an investor can make is becoming greedy for the returns and wanting all of it at once. The essential virtue of an investor is patience. An investor should be anything but impatient. Becoming greedy and wanting quick and big sums of returns can make an investor more vulnerable to making wrong decisions and causing a loss in the long run in exchange for a little short-term profit and return. Greed can decrease the financial visibility of an investor and their ability to project profit and loss. There are two common approaches in an investment market, the bull and the bear approach. It is said that investors with either of these approaches will make a profit. But the greedy investors will not be able to make a profit and always be at a loss.
Although there are many other mistakes that an investor or a day trader must know about before investing their investments into a stock, these three are the most common ones around. An investor must keep these mistakes in his mind while investing in stocks to make a good profit out of his capital. The best that an investor can do is to make an investment plan before jumping into the market. For the day-traders, they should make regular plans and should invest with a proper strategy. They must implement stop loss and should avoid canceling it. A good trader never follows the herd. He makes decisions considering past trends and moves his investments accordingly. He knows when and where to invest and never follows the advice of others. A good investment is always made after a good research on that particular program or stock.
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