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20 Common Mistakes Beginners Do When Trading Stocks.
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20 Common Mistakes Beginners Do When Trading Stocks.

20 Common Mistakes Beginners Do When Trading Stocks.

The first trade is always the most exciting. However, as with all other things in the world, a perfect start can only be followed by a few mistakes. Even if you are aware of the possible trading mistakes that beginners make, it is very likely that you may still fall into one or two of them at some point. The best way to avoid these pitfalls is to be fully informed about them and learn from others experiences. This article will describe some of the most common trading mistakes made by the beginner.


1. Trading without a plan

Trading without a plan is like flying without a destination. You may be able to fly but your chances of hitting the ground are more than someone who has a destination. Trading without a plan is like driving your car on the road without looking at the direction you are headed to. You may reach your destination but in the process, you’ll have to make a lot of unexpected detours and spend more gas money! In trading, as in life, having a goal helps to keep you laser focused on your objective and to determine the best way to get to your goal.

Trading without a plan is a very common mistake that newbie traders make. Traders lose more money than anything else in the market because they are not trading with a plan. So, it is very important that you have a trade plan. It is like you are going to war – you can’t go in there without a plan. Sure, you might be able to make opportunities on the way, which you would have never planned for but you have to have a plan going into it.

A trading plan is like a map on your journey. It shows the way. It is not a guarantee that you will hit your target, but it gives you a better chance to make it through.

2. Failing to identify the primary drive behind every trade

Understanding what is driving each one of your transactions can help ensure that all your investment decisions are clear and logical. Developing a trading strategy can help you answer this question. As a rule, every trade should be aimed at making the maximum possible profit on an investment. The more your returns on each transaction are, the greater your chances of doubling or tripling your capital in the long run. 

3. Trading without any money management rules

Trading in itself is a risky thing to start with. Trading without money management can be the biggest risk of all. If you want to pursue trading as a career, you need to learn the basics of money management. Money management is required for traders for the following reasons:

1. No trader can predict the future. In fact, no one in this world can predict the future. But traders do believe that they can predict the future. This is what causes them to trade without money management.

2. Trading without money management can lead to huge losses and financial ruin. This is the most important reason of all. Without managing your risk, you may end up losing all your money.

4. Forgetting about limits

The very idea of placing limits on your financial transactions may be hard to swallow considering how many successful investors there are out there who never set up any boundaries for themselves. Remember that every trade should have its own time frame which will become an integral part of your overall investment plan. There’s nothing wrong with taking profits when they’re available; if fact this is what everybody does whether they make it known or not.

5. The spread trap


Many traders get caught in the spread trap, which is when they forget about trading with real money and allow themselves to be driven by greed. They can’t stand not taking part in all of the action because they are afraid that if they miss this one great chance to make a killing they will never get another opportunity like it again. The most dangerous thing you can do when you’re new to trading is try to catch “every” little move up or down; let your profits run with the market instead of trying to guess its next movement.

6. Refusal to accept losses

Everyone knows that even successful traders sometimes end up on the losing side of a transaction, but many are still unwilling to admit this fact. Accepting occasional losses as an inevitable part of success is the only way to keep your emotions in check and remain a successful trader for years to come. Remember, if you find yourself constantly racking your brain for new ideas on how to prevent yourself from losing money, it’s probably time for you to take a break.

7. Believing that you're always right

It is essential that you clearly understand that when it comes to trading, nobody is infallible. Although you should stick these principles as closely as possible in order not to lose too much of your hard-earned cash, at some point along the road somebody will figure out a better strategy than yours and they will eventually prove themselves more worthy of success. You must be ready to admit defeat gracefully whenever this happens because continuing with an outdated approach will only lead to more losses.

8. Jumping in too quickly

One of the most common mistakes that beginning traders make is trying to get on board with every profitable action which takes place during their sessions on demo accounts. The moment they see news updates, whether real or imagined, they immediately implement their strategies without even checking the market conditions first; this often results in missed opportunities and wasted capital. Learning how to manage your emotions is one of the most important parts of trading successfully.

9. Taking profits at random times

For some reason many novice traders cannot wait to take profits “on time” instead of waiting for it to reach its peak value before taking options. This can be costly if you give back all of your hard-earned gains perhaps in the last hour of the trading session because you just had to have that extra cash.

10. Relying too much on technology

Relying too much on technology

While automated trading systems are indeed useful when it comes to entering and exiting trades quickly, they are not bulletproof. If you don’t have any experience in reading charts yet, do yourself a favor and learn how to read them before becoming dependent on anything else. The easier it is for you to spot opportunities by yourself, the higher your chances will be of remaining successful long term.

11. Not managing risk properly

Traders sometimes find it difficult to manage risk in their trading. It is extremely important to analyze every trade before taking it. It is also important to know about various aspects of the trade including your entry and stop loss points. Many traders are eager to make quick money, but they forget one important thing that trading is not a get rich quick scheme. If you are not comfortable with the trades, then you should avoid the trade no matter if it is highly profitable or offer high return. In trading, you can’t win if you don’t play, but you can’t lose if you don’t bet.

Sometimes traders get so excited about setting up their entry points that they forget about measuring potential losses properly beforehand. Avoiding risk is not a strategy. Successful trading is about taking calculated risks. Never bet on a sure thing but always bet on you to win. The most important thing to understand about trading is how to survive.  This means, being able to handle losing trades.  Trading requires a different mindset than the usual buy, hold and sell.  It requires the ability to think in probabilities, to accept risk, and to accept failure as part of the game.

12. Taking a short-term view

An excellent way to improve your chances of success as a day trader is by taking a long-term perspective instead of focusing all of your efforts on outsmarting other market participants one day at a time. In order to do that, you must be able to clearly see what the overall trend is and where it’s headed within each timeframe rather than getting stuck in trying to pick tops and bottoms moment by moment. If you can become good at this, you will greatly increase your chances of reaching consistent profitability. 

13. Not paying attention to the bigger picture

Many novice traders get so caught up in their daily routine that they forget to take a step back and look at what’s truly going on. If you make it your business to learn about all of the different moving parts within each market before jumping in, not only will you greatly improve your chances of success but you might also be able to help others avoid making costly mistakes.

14. Not trusting your gut

Believe it or not, there are plenty of people out there who feel that following their instincts when trading is something to be avoided rather than embraced. No matter how much you try to fool yourself into believing otherwise, those who manage to win consistently over long periods of time simply trust those same feelings even if they don’t understand where they are coming from.

15. Treating trading like a game

Treating trading like a game

There is no denying that attempting to take money out of the market while having fun is indeed possible, but for some reason many beginners just don’t seem able to tell when they are taking things too far. It’s one thing if you experience an occasional setback while trying to get your feet wet with demo trading, but it should never turn into something you dread doing because it will invariably lead nowhere fast.

16. Trading without stops or targets

Another common mistake which novice traders make is avoiding using protective stops and profit targets even though all other experienced participants do so without ever giving them any thought whatsoever. Quite frankly these safety nets keep the vast majority of people in the markets safe, which is exactly why they are considered obligatory.

17. Not sticking to the plan

It’s hard to imagine how you can have a strategy that works if you are not willing to follow it through, even if it means taking smaller profits for the sake of being patient. If you don’t put in maximum effort when trying to trade your plan, stop expecting anything more than mediocre results.

18. Letting losses run too far

Some traders tend to get overly confident during their winning streaks and forget about protecting their capital along the way, which inevitably sets them up for failure sooner or later. On the other hand, those who manage not to let this happen over time end up becoming successful. 

19. Blowing off trading entirely

If you are not willing to do it right, then there is really no point in doing it at all. Trading with your own capital is simply not for everyone, so if you are not having fun or seeing any results whatsoever there isn’t much point in being stubborn about it.

20. Making up your own rules

Make your own rules

Everyone has an opinion on the markets these days, which is why most of them will never amount to anything worthwhile especially when they go against established rules that have been proven by time and experience. Even though nobody can tell you what works best for you specifically, it does pay off to learn from those who have gone ahead of you by observing their wisdom over time. 


Even the best traders make mistakes sometimes, but these mistakes are easily avoidable if you’re aware of them. If you want to trade stocks, then it’s important to learn from other people’s mistakes. We hope our list helps you do that!

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