Traders usually buy and sell stocks more frequently and hold positions for shorter periods as compared to investors. Such numerous trading and smaller holding periods could result in big mistakes which could devastate any new trader’s capital in quick time. Here are 5 common mistakes that traders make:
Letting your losses to mount
One of the essential characteristics of any successful traders is the ability to take the small losses quickly if the trade isn’t good and move to their next trade idea. Unproductive traders, on the contrary, get stuck if their trades go against them. Instead of taking swift action for capping the loss, they continue to hold the losing position in the anticipation that their trades would work out eventually.
Failure in Implementing the Stop-Loss Orders
Stop-loss orders are very significant for achieving success in trading, and failure in implementing them is the worst mistakes which a novice trader could make. Tight stop losses usually ensure that the losses are restricted before they become large.
No Trading Plan
Most of the experienced traders go about a trade with a defined plan. They are of aware of their entry and exit points. And the amount of capital that needs to invested. And the maximum amount of loss which they could take, etc. Inexperienced traders do not to have any trading plans before they get into trading.
Trading very frequently
Overtrading could eat away the returns to a point where good profits transcripts into considerable losses. While an experienced trader understands that trading very often could be brutally detrimental for his/her overall performance and returns. Naïve traders might have to learn this important lesson.
Following the Herd
One of the 5 common mistakes that traders make is blindly following the herd, and ending up paying a high price for the hot stocks or might initiate short positions in the securities which have plunged already and might be on the edge of turning around.