4 Mistakes Stock First-Timers Make

by Andrew McGuinness  //  dec. 29, 2017

Stock is already risky business as it is. If you come in not knowing what to do or how to start, chances are you’re either going to get scammed or lured into doing something you’re eventually going to regret. Lucky for you, there are people who have already done some mistakes and have shared their wisdom. We rounded up the four most common mistakes first-time stock traders make below:

1. Ignoring Capital

The investment sector is incredibly mesmerizing, isn’t it? Once you’re in, you feel like you’re a part of something bigger than yourself. That is, until you realize you have spent your family’s entire savings as investment capital.

One of the biggest mistakes you’d 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

You got into the market because you want to make lots of money. The question is: who doesn’t? As soon as you realize that trading stocks is as serious of a job as any other profession in the world, you can start establishing plans and goals to keep you in check from time to time.

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

Here’s some trading 101: as soon as you think that stocks are just an “anything goes” field, then you’ve already lost the race. Going in without a plan is like going to a bloody battle bringing nothing but a water bottle. Consult other day traders and read up what experts have to say. Set up a trading plan and follow it conscientiously.

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. We get it: after having small losses, you become greedy because you just want a “win”. If you’re seeing the same pattern over and over again, then something about your strategy must be wrong. Retrace your steps and understand what went wrong instead of squandering your capital away again.

Conclusion

If we’re being honest, everyone is still a beginner investor. 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.





Get unlimited access to our Learning Center,
Broker Insights and Exclusive Promotions for Free!

Open an account