So, you want to know the five most common trading mistakes among traders? Put simply, here they are:
1. Trying To Trade Like Someone Else
This is a huge mistake. Many of us see big stock market people on the news and we start wanting to trade like them. You might think to yourself, “Well, if they bought it, then I should buy it too!” That's a huge mistake, because they probably know something you don't, and you're probably too late to get into the game! In a similar way, maybe you hear your neighbor say that he has the hottest tip in the world about this stock, or you see a headline that comes across your computer screen: “This stock is guaranteed to work.” No, that's all garbage. Don't make your trading decisions based on advice from random sources, verbal or written.
2. Not Doing Your Homework
The second most common mistake traders make is not putting enough time into research before investing their money. Don’t just “shoot from the hip”. Instead, you need to do a little bit of research. At TRADEway, we teach you how to do that, so start doing more homework before you just throw your money out there!
3. Trading Too Much
This can be a matter of trying to get into too many trades at once, feeling like you need to be in a trade at all times, or the mentality of buy and hold. If we got into a stock 20 years ago and we're still in it, we should probably rethink that. The best mindset to have is to find stocks that are winners, ride them, and then get out. The stock market is actually a very volatile, “radioactive” environment, so you want to get in, follow the rules, and get back out, rather than stay in and become a radioactive pile of sludge. How's that for an analogy?
4. Not Stopping Out
That means getting not out of a trade when it's going wrong. Why would you ride a sinking boat to the bottom of the ocean with the hope that it will go back up? The same applies to your trades. Staying in a play that is going against you is not being a good steward of your money.
5. Using Too Much Money
When it comes to the amount of money you put in a trade, here is a good rule to follow: if you can't afford to lose it, don't use it. As traders, we don't want to put our families in financial distress as we try to reach for trades in the hope of becoming rich overnight. Instead, we want to be patient as we learn valuable skillsets and then, in time, grow the seed we have been given in order to reap that harvest.
There you have it! These are five common mistakes traders make. Make sure you’re not!