When you make mistakes, you learn. Making mistakes and learning goes hand in hand when it is about trading. Generally,the traders buy and sell their securities more frequently and hold such positions for shorter periods as compared to traditional investors. Such shorter holding periods and frequent trading can actually result in mistakes which can wipe out the investing capital of a new trader rather quickly.So in order to be a pro at trading at NEoWave.com, follow these mistakes which you must not make:
- Not Having a Trading Plan or Sticking to One
The traders who get into a trade with a well-crafted plan are experienced and they have learnt it the hard way. They are aware of all the entry and exit points, the maximum loss they are willing to take and the amount of capital that they can investin the trade. Beginner traders generally don’t have a trading plan in place and they just start trading. In case they have a plan, they may abandon it in case things are not happening their way. Or they may alter their course altogether only to end up getlashed up. For example, they may goshort after buying a security initially because it is declining in price.
- Failure to Implement Stop-Loss Orders
A big indication of you not having a trading plan in place is not utilising stop-loss orders. Generally Tight stop losses implies that losses are capped much before they end up being sizable. While there is a danger that a stop order on long positions might get implemented at levels, the advantages of such orders outweigh this danger.
- Letting Losses Mount
One of the main highlights of a successful traderis his ability to plunge in a small loss rapidly in case a trade is not working well. Adopt a next trade idea and move on to it. On the other hand, unsuccessful traders, usually get all distressed and depressed if a trade goes down. They might hold on to lose position in the expectation that the trade will eventually work out, rather than taking quick action to cap a loss.
- Averaging Down (or Up) to Redeem a Losing Position
An investor who has a long investment time horizon may prefer averaging down on a long position. But it may be troubled with perils for a trader that is trading riskier and volatile securities. Few of the huge trading losses that have occurred in history are due to a trader that kept adding to a losing position. Eventually, he was forced to cut the entire position when the scale of the loss made it unsound to hold on to the place.
- Using Too Much Margin or Leverage
Margin is the utilisation of borrowed money to acquire the securities. While this margin can assist you to make more money, it can also help in exaggerating your losses, and then making it a sure downside. As a new investor don’t get carried away with what appears to be like free money.
