Trading in the stock market can be pretty challenging, particularly for beginners. In fact, even seasoned stock market traders with years of experience under their belt are prone to making mistakes that can prove costly in the long run. As Kavan Choksi says, a good understanding of these mistakes can help traders to avoid them, regardless of where one is in their stock market trading journey.
Kavan Choksi sheds light on certain stock market mistakes that must be avoided
There are numerous people who tend to be fascinated with the idea of trading stocks for a living. However, like the majority of the most performance-based businesses, most of these people may not be able to succeed in stock trading. There are many common mistakes traders tend to make that prevent them from beating the market or achieving the desired outcomes, here are a few of them:
- Having no plan: One of the biggest and most common mistakes newbie stock market traders make is that they get started without making a plan. They simply start trading and hope it works out well, or they begin trading only by looking at how much money they can make and do not calculate the potential risk. Several new traders wing it and hope it works out well. However, such an approach does not always deliver the desired results. Rather, the lack of a plan makes it difficult to identify the right entry and exit points and ultimately results in impulsive trades that may lead to significant losses. Hence, it is prudent that traders create a detailed plan that outlines their entry and exit points, risk tolerance, and targets.
- Inadequate research: In order to make swift profits, a number of traders skip the research and directly start trading in the markets. However, it is imperative to understand that inadequate research and insufficient knowledge of the markets may lead to poor investment and trading choices. Traders need to carry out thorough research on the assets, market trends, as well as any other relevant news or developments.
- Failing to use stop loss orders: In case the market does not move as per expectations, traders can suffer losses in open positions. Stop loss orders would help limit the amount of loss one incurs in their traders. Unfortunately, even with this benefit, several traders overlook the importance of stop loss orders.
- Ignoring market trends: There is no golden rule that requires people to trade according to or against market trends. Traders, however, need to stay aware of the direction in which the market is trending. This can help them to plan their trades in a more efficient manner. To be successful, traders must be aware of market trends and use technical analysis to identify potential price patterns.
As Kavan Choksi says, in addition to the points discussed above, making emotional trade decisions is another mistake that should be avoided. It is not uncommon for traders to be driven by emotions like fear, greed, or impatience when placing buy and sell orders in the market. However, as these trading decisions are driven by impulses and not concrete historical data, they usually lead to poor outcomes.