If you have decided to get involved in the world of trading, you may be feeling a bit hesitant or even terrified. One thing you should never do is dive right in without a plan or help. In this post, we will look at some of the common mistakes that newcomers make.
- Buying stocks without a plan – There is no denying that one of the most common mistakes people make is making purchases on a whim without an actual strategy or plan. When you enter into a trade, you want your questions already answered. These include: How much money am I willing to risk? What are my price targets? What am I seeing on the chart that is going to make me go short or long? At what point does my trade go against me and create a no-win situation?
- Trading unclear and difficult patterns – When you’re starting out, it is vital to stick with indicators and patterns that are clear and cannot be mistaken. A lot of people often get in the habit of seeing patterns that are not really there, and, therefore, making wrong choices.
- Not keeping a trading journal – It is important to keep a journal of all of your trades; whether they were good or bad. You can then study your timing, your entries, and your exits. It will help you to learn where you went wrong or what you did right. This enables you to make sharper decisions and trades in the future.
- Buying stocks with no volume – You will give details regarding the stock volume and price if you’re trading stocks. Nevertheless, most rookies tend to ignore the volume and only look at the price. This is a big error. You need to remember that the price is validated by the volume, and so it really does matter.
- Not cutting losses quickly – Last but not least, we cannot mention trading mistakes without referring to incidents whereby people do not cut their losses quickly. Before you enter a trade, your risk needs to be predetermined. How much are you willing to risk? What is the risk to reward ratio? Once you know the amount you are willing to risk, you can set a stop loss once you have entered the trade. Trading software can help you to manage all of this.
As you can see, there are a number of different errors that people tend to make when they are trading for the first time. If you can avoid these mistakes from the beginning, you’ll give yourself the best chance of trading successfully. We hope that this information will make you feel more confident when you go about your next trade.