Common Mistakes of TradersHuge risk
Traders sometimes make huge money often by favourable market conditions which purely by chance. But they mistake it for their talent and start investing more money in the attempt to make more profit and get rich quick. It is almost more like a rule that you will start losing on the very first day or the second day when you start investing more money without worrying about risks. Many traders experience this quite often, but unfortunately they forget this valuable lesson of market so soon that they commit the same mistake over and over again.
They can overcome this mistake only if they realise that share market is not an exception to the general rule that it takes more time and effort to start getting rich as in any other field. Always think about risk before increasing the amount of money you are going to trade, no matter how confident you are about your method. Your method may have given you winning streaks for a very long time that it blindens you about the risk. But you should always remember no method will give profit in all markets continuously. And nobody can predict before hand if the market is going to give profit for your method today.
Being positive is good for other parts of your life. But in Share market it is always advisable to be negative in each and every step, because the profit is of very less importance in share market compared to the huge loss , the market incurs on traders quite often.
No Stoploss trades
Traders often get frustrated when they see the market reverse just after hitting their stop loss. So they try to lower the stop loss level considerably and often get more frustrated when they see the market doing the same even with their new stoploss levels. So they eventually start practising trades without stop loss. Sometimes it may work well for few days which increase confidence level of traders about their approach.
But they will be in there for a shock when they see the market reverse very sharply giving them no time to think where to come out of the trade. So they end up taking a huge loss which will damage their account so badly that they will even be wiped out of their account in some cases. Hence, it is always advisable to have stop loss in each trade. Sometimes even good method will fail continuously. But you should not change your stop loss level. If you are in doubt about your current stop loss level, then do paper trade with new stop loss level without risking real money. This gives you more confidence into your new stop loss level before putting the actual money.
This mistake is committed often by new traders. The very first trade of all new comers will mostly be a profitable trade. But that is a trap. This first trade gives them over-confidence because of which they turn blind eye to all loss trades that follow. So they end up taking excess trades that will soon wipe up their account.
Excessive or over trading behaviour is due to lack of discipline. To be a profitalbe trader, one must be a disciplined trader. Disciplined traders just accept their loss and move out of trade for the day. This requires a strong discipline. Because human mind tends to go crazy on seeing loss continuously and start taking irrational risks. One should be aware that mind cannot work effectively in such situations. So it is always better to stop trading in that mind set and leave trading for the day if possible for few more days untill you get your mind totally relaxed.
Greediness to make more profit:
More often than not, we come across traders who are hesitant to square off their positions after the stock gives them decent profit. After seeing such profit so soon, their mind start getting greedy to make more money. So they decide to wait some more time only to see the market that is reversing not only to take away their profits but also give them huge loss if they do not have stop loss in place.