25 Aug 2021, 16:06

The stock market is like a minefield littered with many cases of failed traders. If you want to stay in this game and be a profitable trader for the long haul, here are the top 5 mistakes you want to avoid making before you fall into the basket of failed cases.

Mistake #1: Trading without a stop loss

How does it feel like to take a bungee jump without the bungee cord? Many traders do that in the stock market when they failed to protect their trades. Remember that there is no guarantee that you will be making money on every trade. Therefore, you need to protect yourself by keeping your losses minimal. The way to do this is by putting a stop loss for every trade. When you can keep your losses small with every stop loss, you would not lose a huge chunk of your budget. That’s means to say you would still have enough capital to buy another stock and recover from your losses!

Mistake #2: Getting out of a trade too late

When you do not put a stop loss, you risk getting out of a losing trade too late! It is not shameful to enter a losing trade. At the start, you will never know if that is the trade that will be profitable. However, once it becomes obvious that a stock has become very bearish, many investors can’t bear to exit and accept the losses. Therefore, when the stock price plunges further down, it becomes too late to exit and they would now be sitting on even greater losses, praying that one day it will recover again (If it does…)

Mistake #3: Changing strategies too frequently

It is not wrong to ditch old trading strategies if you find that it does not suit your personality type. Afterall, different strategies cater to different characters. However, many traders make the mistake of changing strategies too frequently. Remember that you cannot master any one trading strategy overnight. It takes time to understand, observe and put into practice every new strategy that you learn. This goes about for every new discovery in life. When you do not devote enough time to test out if this strategy works out for you, you will keep on giving up. That means you will spend lots of money attending new trading courses to learn new strategies, but you will be a master of none.

Mistake #4: Not learning from your trading mistakes

I learnt more from my failures than my successes. Every trading mistake is a treasure trove for you to learn and not repeat it the next time. If you think that life of a trader is to buy and sell stocks every day, then you are wrong. A good trader spends thousands of hours looking at trades and analyzing what went right and what went wrong. When a trade fails, he looks at past results to see if there is a pattern of failure emerging from failed trades. Then, he commits not to make the same mistake again. When you allow a bad trade to harm your confidence and not take it as an opportunity to learn, then you will be committing Mistake #5.

Mistake #5: Quitting before you master trading

You only fail when you give up. As long as you do not give up, you always have a chance to redeem yourself. It is not wrong to make mistakes before that’s where the learning comes from. However, many people allow their mistakes to get into them and just give up. Remember that trading may be hard, but it’s not rocket science. You do not need to possess a PhD in order to master trading. Every ordinary person who has an ounce of perseverance and resilience can do well in trading. Just like every hero who undertakes a perilous journey, if you are willing to overcome every failure and obstacle thrown in your path, you are most probably going to reach your goal in becoming a very profitable trader.  

 

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