10 Trading mistakes every trader must avoid No ratings yet.

Trading is a business where mistakes are inevitable. Even the best traders around the world have an average strike rate of 60-70% and since each mistake cost a part of our precious capital it is essential to know what mistakes a trader must avoid in order to stay there in long run.

  1. Lashing the Trend– As said in Dow’s theory ‘trend is the trader’s best friend’. A good trader must know what is the primary and secondary trend existing. Shorting a strong counter, or buying a weak counter will land you nowhere in long term. You have to get back and see the bigger picture in order to be successful in markets.
  2. Cutting the Profits – Never ever cut your profits. If you are on a right trade and sitting on a pile of profits; trade with a trailing stop loss rather exiting all before the BIG profit really comes in!
  3. Ignoring multiple Time Frames – Being updated with every day market happenings is fine but ignoring the big picture will keep you out of the right track unless you are exclusively a day trader! Swing, positional, and investors must keep pace up with weekly and monthly trends.
  4. Leveraging Mania – Leveraging on your account is the most dreadful thing a trader can do with his/her account. It’s like buying a Porsche on high interest loan when one can’t even afford to buy an Alto in all cash!!
  5. Software Fad – The latest fad!! Since trading is no exact science depending too much on expensive software is never a good substitute to skill and experience. So, instead of searching for best software first upgrade your trading skills.
  6. Too much of  F&O Strategies–  Any damn strategy without analyzing the underlying technical aspects on charts wont help you reap much. Strategies are built once the underlying stock is well studied.
  7. Too Many Indicators – The only purpose of too many indicators  on charts is to have a colorful background!!  In trading less is more. Savvy colors on charts all around doesn’t make better traders or analysts. Skilled traders look for not more 4-5 indicators. If you are going to make it , 4-5 complimentary indicators are enough.
  8. Getting a Wrong Mentor– Everybody needs a mentor to get to know the subject. If you are trying for long in stock market and still not able to get on right track, search for a good mentor, instead. He/she will let you dig the actual concepts in trading. It isn’t as simple as it looks!!
  9. Trading Illiquid Counters – Counter with little or less liquidity doesn’t allow easy entry and exit which is imperative for traders.
  10. Handling Losses vs. Profits – Controlling emotions after a series of good trades or bad trades is what set apart the winner and a loser. Yes, it does! That is the reason they keep ‘Trading Psychology’ & Behavioral Finance as one of main pillar heads in successful trading.

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Author: Traders' Chowk

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