After taking a deep plunge in 2020, the Australian stock market is back on track with an index above 7500 points. Investors have been more than careful when trading this year. This is due to the pandemic and consequential factors like unemployment and inflation.
If you are a long-term investor then you understand that mistakes are part of the trade. Yet, there are some common mistakes that even the best stock trader falls prey to.
There is no need for you to incur unnecessary losses. A smart investor knows that knowledge is the ultimate power in the stock trading games. Learn how to avoid these common mistakes in the following guide.
Table of Contents
1. Stock Trading Isn’t Gambling
You can’t make it in stock day trading by winging it. It’s unwise to invest in a stock because you had other traders referring to it as a ‘hot piece’. Instead, you need to devise a strategy.
A smart investor gets as much information as they can before planning their trade. Execute your plan and wait for the right triggers to propel your trade.
2. Don’t Get Too Attached
Some investors get too attached to their inventory. They are not ready to let it go even when the stocks are most profitable.
Other investors don’t realize that the stock trend is going down and nothing will bring it up. Thus, they suffer big losses instead of small ones.
Be willing to let go of stocks more often, that way, you will profit more from the business. Moreover, be aware of falling in love with your business model. Yes, it has helped you gain unimaginable profits over the years but it isn’t working anymore.
Day trading needs you to treat your inventory as a commodity that you are buying and selling.
3. Don’t Ignore the Volume
The best day trader knows that volume outweighs the stock price. Yet, most traders only look at the price and ignore the volume.
Before investing in a stock, make sure volume backs up its growth in one direction. Volume is the only sure way that a stock will keep moving up; it ascertains the price.
Volume in the number of shares will always tell you if the stock is worth investing in. Don’t fall prey to stocks that move up on low volume, that is pure hype.
4. Spread the Risk
Another common mistake in day trading is investing in large portions of the same stock item. It would be unwise to invest all your money in one trade.
When you are starting, you might have little to stake. Yet, as you grow you can start investing in different trades. This way, if one suffers you can make a profit in another.
Your best chances of this are when you trade in a diverse market like the China stock trade. Learn more here on how you can expand your trading portfolio.
5. Study Your Game
The best way to avoid common mistakes in stock trading is by keeping an account of your previous trades. This is not a record of how much profit or losses you made.
Note your entries, your exits, the timings, when you won, and when you made losses. Studying how you trade will make you avoid a lot of mistakes that you make often.
Avoid Common Mistakes While Stock Trading
Stock trading requires more than concentration, it demands consistency. It’s better to take time to study your game and come up with a strategic plan.
Remember that information is key in day trading as time is of the essence. Get more articles on financial management on this website.