5 Common mistakes a trader must avoid in stock market

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Stock market trading is a double edged sword . It can multiply your money, on the other hand it can lead to financial suicide. It depends on the way you are trading . Due to attractive return beginners are attracted thinking that it is bed of roses but as per survey more than 90% beginners left the market after losing their hard earned money. It is only because they are unaware with the fact that stock trading is highly risky and it requires high degree of knowledge, experience and discipline. Commiting a mistake is human nature and also a part of our learning process. Mistakes can’t be fully avoided but can be minimised. Here are the common mistakes one should avoid being a stock market trader.

1.Don’t be addicted : Don’t make stock trading as your hobby and keep avoiding trading on daily basis. Do remember that stock market is not a regular activity like business, profession or service. Put yourself in wait and watch position and make a position only when all the things favouring you. Being opportunist is one of the most important quality a stock trader should have.

2.Avoid taking position when there is fluctuation : It is one of the most common reason of losing our hard earned money in stock trading. Whenever high volatility is there in market or any particular stock always keep away and avoid to take a position. Because intra day trade works on sentiments and no fundamental or technical chart works when market sees high fluctuation. In the case no person even experts may predict the direction of market in case high volatility. Traders specially beginners prefer to take position in volatile market to take immediate advantage but as per experience majority of them lose rather to gain.

3.Avoid taking margin money: Using heavy margin is one of the major mistake committed by beginner that may lead to financial suicide. Most of the brokers offering 5 times to 48 times margin. It means a trader is taking risk of  ₹ 4,80,000 by keeping an amount of  ₹ 10,000 . In the case if decision goes against it will financially kill you. Stock market specially trading is affected by both internal and external factors and we don’t have the control over external factors. So it is always advisable to be strict with margin money if you wish to survive for long term.

4.Trade with Stop Loss : It is one of the most dangerous mistake committed by beginner is taking position without stop loss. Never do this mistake even if you are very much sure about the direction. If you are trading in stock market you should always be ready for unexpected rise or fall. Definitely it is uncontrollable but can protect yourself by defining loss that can be borne by you. So do remember to take a position always with stop loss and be strict with defined stop loss.

5.Never try to average : After taking position in a particular stock beginners usually try to average in case decision goes against. Don’t do this because if an stock is falling the probability of further fall always be there. In a case it’s better to leave the position rather to average.

( Copyright@aksrivastava.com)

13 thoughts on “5 Common mistakes a trader must avoid in stock market”

  1. I don’t know a lot about trading and the stock market so this was a really interesting read! I’m sure this will help a lot of people 🙂

  2. A trader makes mistakes almost in every trade.
    Lot of traders think that they need have a very high risk reward ratio. Lot of them try for 80% accuracy ratio. This is very very difficult. Surely there are traders with that kind of ratio but they are probably 1 in 500. Because of this, traders miss out of small scalps which add on to the profits.

  3. I have never traded so I didn’t know that there are mistake that you can do when you become too involved in this and threat it more than a hobby.

  4. I am a commerce student. Your post helped me to understand some of the concepts of stock market. And agreed, don’t be addicted to it and learn first rather than risking a big money in beginning.

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