The trading account is a crucial part of the trading experience an investor or trader has. With a ton of facilities and the ease that comes with a trading account, the chances of goofing up a potential trade also exist. This is why investors or traders need to maintain extra caution when trading through a trading account.
Trading Mistakes to Avoid
No one is perfect, that’s a given, and as a trader, making trading mistakes is a part of the trading journey. Whether you are a seasoned trader or new to the share market India has, mistakes are normal.
However, sometimes certain mistakes end up being costlier than others. From not acknowledging a mistake and repeating the same to being unaware, issues will continue mounting. This is why it is important to recognise these mistakes and try to nip them in the bud. Here is a list of some of the most common mistakes that traders usually make.
Trading with Emotion
No important decision should be made on an impulse. This holds for one’s everyday life as well as when making any trading decisions. We understand that it can be very frustrating seeing the value of a long position you were holding drop, below the rate it was purchased at. The same frustration might arise if you end up missing out on a stock that you have wanted to invest in for a long time.
With this frustration might come other emotions like anger, fear, and anxiety. However, traders mustn’t let these emotions dictate their next move. Don’t immediately start buying more positions at lower prices when your long position falls. And upon missing out on investing in a particular stock, don’t jump on a move after it’s already happened.
Every trader is aware that the stock market has its ups and downs. This is why traders should never let their emotions get the better of them when they are trading. Whether you’re using a free trading account or a premium service, it is important to make trading decisions based on the right information instead of emotions to avoid potential losses.
Moving the End Goal
Sure you can completely overlook the fact that you might have made a mistake on a trade, but it is always better to recognize any losses you might have incurred and not dig further and end up facing more losses.
Let us take a stop-loss order for example. A stop loss order is put on a position so that it can be sold automatically the moment it falls below a certain price to stop any further loss. Now, as a trader, if you decide to cancel the stop loss order, you are essentially running away from admitting you could be wrong, and that there’s still a chance the shares could bounce back.
But this is just one example. You must stick to the plan you had curated for a particular trade instead of changing your decisions at every turn. It is also important to acknowledge smaller losses instead of stretching a losing trade out.
The Wrong Time Frame
Trading should be something traders enjoy and are not stressed out about. This also includes the kind of pace certain stock market timings have to offer. Take for example day trading. Day trading is very fast-paced. Swing-trading on the other hand is slower and could potentially bore a trader. This is why it is important to pick the right time frame for the kind of trades you want to indulge in and at the pace that you enjoy. With the right time frame and trading pace, traders will have clearer decision-making capacities, leading to fewer potential losses.
In Conclusion
As cliche as it may sound, trading too is an art. Making decisions like when to carry out a trade, when to back out and when to buy more needs a calm mind and nervous system. By not letting your emotions get the better of you during a trade, ensuring that you stick to your plan and figuring out the best trading pace and time frame for yourself, you could truly minimize your potential losses greatly.