5 Common Mistakes that Stock Traders make

5 Mistakes that most Stock Traders make

    First of all, what is trading?

    Stock trading involves buying and selling of shares of a particular company over a short term. It is based entirely on the research that the trader is willing to do, not just about the particular stock that they are trading, but also the graph analysis and other skills they need to acquire to be a successful trader.

    You might have seen stock trading merely as an easy medium of getting rich with tempting advantages like being your own boss, having freedom and making a lot of money in a short period of time, but the truth is that anyone can do stock trading, but only a few can make money out of it the sustainable way. This common belief that “trading is simple” is not just not true, but can also lead to major losses for multiple traders, as considering it as something that does not require much effort makes it more likely for investors to look over the skills and information they need to have before doing it. Therefore, to prevent you from falling into a pit of losses, here are a few mistakes you need to know that traders make for you to know what not to do.

    First of all, you should know that despite trading being only 10% technical and 90% psychology, the majority of people make the mistake of completely undermining the importance of technical knowledge before starting to trade. What they do not realize is that the technical knowledge of all the concepts related to the stock market and trading is the primary building block towards understanding the psychology behind it, without which the entire structure of your trading stock portfolio will fall apart. The way to prevent you from making this mistake is to take out some time and invest it into learning more about graph patterns, that in simple words are the indicators that help you understand where the market is headed for you to make money out of it.

    Another contrast approach that is equally harmful is directing your entire focus to technical understanding instead of balancing to learn the skills supposed to be developed. The important skills that are so necessary include discipline, consistency and patience. The reason that these skills are utmost important for a trader to grow into is that these prevent you from making any impulsive decisions out of fear, greed or a random and baseless recommendation. Therefore, it is advised to take trading from a small to large scale at a steady pace as it helps you to develop these and turns it into your habits.

    The next mistake is thinking, “Trading can help me make quick money as it is not that time consuming”. One of the main reasons that people begin to think so is due to the stock market hours being from 9am to 3am. But the fact is that, as mentioned in the previous paragraph, gaining information and doing the required critical research is vital to become successful at trading, it does demand long hours regularly as you have to plan the next day's trade according to the recent news and other factors.

    Next up is losing faith along the process after a certain point of time just because you have not gotten the extravagant returns in a short period of time like excessively elaborated by the influencers on social media. This is because the influencers try to make it sound like a very quick and easy process. Whereas the truth is the contrast, meaning that it is a time consuming process and takes a few years of continuous effort to finally attain high returns. I will let you in on a secret. The influencers that got you motivated in the first place that are currently living luxurious lives have also gotten to that stage after the time, effort and money of a couple of years and not just a couple of months.

    Coming to the 5th mistake that stock traders make- treating trading like gambling. There might be a thin line of differentiation between them, but that is what makes one have the basis of simple luck and one have the basis of purely logical and statistical analysis. Trading is not about guessing where the market is headed. It is about finding out the probability of it going in different ways according to the factors of demand and supply that determine the prices of stocks in the first place, keeping in mind other variables like the financial statements, previous performance and recent news about the company.

    There you have the most common 5 mistakes that stock traders make and also the way and logic of understanding how you can avoid making them. So what are you waiting for? Trade away!

~Shagun Johri