4 Mistakes Stock First-Timers Make

by Andrew McGuinness     Sep 03, 2019

Stock trading is already risky business as it is. If you get into trading stocks without loading up on basic financial knowledge, your chances of procuring large profits significantly decreases. Luckily, there are people who have already done mistakes and have shared their wisdom. We rounded up the four most common mistakes first-time stock traders make below:

1. Ignoring Capital

One of the biggest mistakes you might come to regret as a novice trader is not allocating specific funds for your capital. Don’t go in unless you’re ready. As a beginner, your first account is likely to be a bust, so why risk thousands of your hard-earned dollars on a probable failure? Make sure that the money that you come in with is money that you can afford to lose. Save up for necessities and never treat your investment as your one-way ticket to riches.

2. Setting Unrealistic Goals

Setting goals like daily returns and dream stocks you eventually want to invest in will not only keep you motivated, but also grounded. Through these, you can remind yourself of the larger picture. Are you planning to invest in another market 10 years from now? Are you just in it for the money? Setting up questions for yourself can help you find questions you wouldn’t face otherwise.

3. Going In Without A Plan

As the saying goes, if you fail to plan, you plan to fail. Before jumping into trading stocks, you need to have a solid trading plan that you will follow conscientiously. You can consult other day traders and read up what experts have to say.

One way you could consistently keep yourself in check is by taking a trading journal with you. Document your losses as frequently as your wins. Through this, you can review certain aspects of your trades and see which strategies are working vs. those you need to let go of.

4. Overtrading

Overtrading happens when someone creates a huge account opening multiple lots. This behavior open leads people to lose up to half of their trading capital. Ultimately, the problem come back to having insufficient starting funds in the first place.

Spending too much of your capital on risky stocks just because you want to follow your gut is one of the easiest ways you can lose. It is understandable that after a string of small losses, you become desperate to have a win. You need to recognize this bad habit and eliminate or at least lessen it as much as possible. If you’re seeing the same pattern over and over again, something about your strategy must be wrong. Retrace your steps and understand what went wrong instead of squandering your capital away again.

Conclusion

It doesn’t matter if you’ve been trading ten, twenty, thirty years. The stock market offers a lot of challenges to an individual and each trade still counts as a learning experience. As you trade longer, the more discerning you become when it comes to the trade.





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