Consider your mistakes a right of passage, as we’ve all been there. As a beginner, mistakes are almost inevitable. Below are the 4 mistakes I think most novice traders suffer from in their infancy stage; get familiar with them and do your best to avoid them.
Betting a hefty portion of their investment capital on one trade. The saying, “don’t put all your eggs in one basket” has passed the test of time for a reason. You hear it time and time again because there’s some truth to the phrase. Knowing this, don’t bet the farm folks. In the stock market, you essentially have a 50/50 chance. You’re either right on the trade or you’re wrong on the trade. Considering you have a 50% chance of being wrong; betting all your capital on one trade is just asking for trouble.
Take away: Come up with a comfortable dollar amount or percentage to place on each trade.
“THE DOG ATE MY HW”
Not doing their homework and a general lack of preparedness.
Take away: When you enter a trade, know why you’re entering the trade. Do your homework.
Overtrading! As a new trader, you shouldn’t trade 5-10 plus times a day. Commission alone will eventually knock you out the game; if the seasoned traders don’t do it first.
What you should be doing around this time is learning as much about the market as you possibly can.
Take away: Learn the markets
“HOLDING ON TO LOSERS”
Investment billionaire, Paul Tudor stated “losers average losers”. The quote doesn’t necessarily reference to cutting losers quickly but he’s speaking to this idea of holding on to a losing position. I find new traders, for whatever reason, have a hard time cutting losses. It serves you no good and will only keep you awake at nights holding on to a losing position.
Take away: CUT LOSSES QUICKLY!!!
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