Whether you’re a day trader of stocks, or dabbling in rapidly changing foreign exchange rates, a beginner is still a beginner. You’re bound to make mistakes every now and then. Even experts do that, because nobody’s perfect and the market is undeniably volatile.
However, just because you’re a beginner, it doesn’t mean that you should make mistakes all the time. A good learner grasps the impact of the mistakes of those who came before him or her. For those that are not familiar with these yet, here are five common mistakes that beginner traders make that, unfortunately, lead to some financial disaster.
Betting All of Their Savings
First off, trading is a form of gambling. You’re wagering on the possibility that the price of the stock or the rate between the currency pair you’re investing in will increase while you’re holding claims to those. Given the volatility of the market, you should be prepared for the fact that that increase in price might not come at all.
Hence, you should hold back some of your money. Don’t put all your eggs in one basket. If that stock causes you losses, you should be able to pull back with some of your money intact.
Not Doing Enough Research
Information is definitely the most powerful commodity and most priceless commodity in this world. Information empowers people, most especially businessmen. This is true when you’re engaged in day trading; you’d need to know if a certain stock has potential to experience significant increases in price in the future, and that requires research and diligent following of news regarding that company.
Not Developing a Solid Strategy
Business is war, as they say, and war requires strategy. If you trade without a strategy, it would be like taking your yacht to a random part of the ocean and simply hoping you can reel in some games after casting the line. That simply will not do – depending on luck alone makes the road to financial security a very long and hard one indeed for you.
It takes a while to create a strategy for your trades, and you could expect to make some mistakes or experience some losses along the way. That time spent on polishing your strategies will definitely be worth it, however.
Being Impulsive Investors
There could be times that you’re tempted to put money on a specific stock just because it’s seeing some spikes in price. The best thing to do here, however, is not to be impulsive and to keep your cool. Just like playing Poker, you must not give in to your impulses and emotions when trading in stocks or in foreign exchange rates.
Setting Unrealistic Expectations
We understand that you want to earn some money, but setting goals that are unrealistic could lead to a lot of mistakes like impulsive trading and holding on to bad trades in the hope that it will recover in the future. You must think big, but also act small. Trading is highly profitable, but only when you play your cards right. If you don’t, you’ll get big-time losses instead.
Trading may look like a game, but it’s actually a very precise activity that requires a lot of mind power. Avoid these 5 mistakes, and you could be well on your way to becoming a successful trader, either in stocks or foreign exchange.
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