7 Major Trading Mistakes

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The 44 Most Common Trading Mistakes That You Probably Still Make

The 44 Most Common Trading Mistakes That You Probably Still Make

Awareness is the first step towards improvement and that is why we collected the 44 most common mistakes a trader can make. Making mistakes is not bad at all and it is part of the process, but when mistakes are made repeatedly, bad and unprofitable habits are formed. The more bad behavior you can eliminate from your trading, the better.

General Trading Mistakes

1. Changing your trading strategy after 5 losing trades in a row
Losing is unavoidable and even the best traders will regularly realize losses. Changing your approach after a few losing trades sets you back on the learning curve. Stick to your approach, every losing streak will end.

2. Not expecting the unexpected
A sudden market collapse, an unexpected news release or the loss of your internet connection can happen at any minute. Be prepared by having a fixed stop loss in place. If a single trade could wipe out your trading account, you have not done your homework as a trader.

3. Not keeping track of relevant news releases – denying the importance of news
Even if you are a purely technical trader, you do not have to trade the news, but you have to be aware of them at any point in time.

4. Not being prepared
Do you just fire up your computer, start your trading software and dive into the charts? Just like a plane pilot doesn’t just ask his co-pilot after the take-off where they are heading, a trader needs to have a detailed trading plan for the upcoming trading session.

5. Not doing a post-trading analysis
What you do after your trading session is over determines your future success as a trader. The professional traders analyze their trades, crunch data and plan for the next day.

6. Not using a trading journal
One of the surest signs that you do not have a future as a trader is when you do not have a trading journal and claim that you do not need one.

7. Not fully learning one method
The consistent losing retail trader jumps from one method to the next, hoping to stumble over the Holy Grail. You have to accept that there is no superior trading method and that it comes down to your abilities to make a trading strategy work.

8. Failing to adapt to changing markets
Once you find a way to consistently make money trading, the work does not end. Financial markets are ever changing and evolving organisms. If you fail to adapt to changing market conditions, you will be out of business shortly after.

9. Letting hindsight influence your trading
Amateur traders watch a trade after they have exited it and beat themselves up if they have entered too early. Other times they try to find reasons why a trade was a loser to change their whole trading approach on the spot. The professional trader collects data and makes educated trading decisions based on a large enough sample size.

10. Not understanding the difference between long term and short term perspective
Over the short term, anything can happen. You cannot control the outcome of your trades and you can certainly not predict the outcome of your next two, three or even ten trades. But over the long term, that does not even matter. If you have a trading strategy that has a positive expectancy and follow it religiously, the only possible outcome is making money.

What Traders Say

11. A smaller stop loss means less risk
The distance of your stop loss has no relation to the potential risk of your trade. Risk is measured in a potential loss of your trading account. You have to set the stop distance in relation to the take profit distance and the trade size to get an idea of potential risk.

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12. You measure performance in pips
A sure sign that traders don’t know what they are talking about is when they start comparing profits in terms of pips. Pip measurements are totally random and have no value of expressing performance. Pips are relative!

13. Claiming that winrate and risk:reward ratio are useless
Whereas by themselves a winrate or a risk:reward ratio has no value, together they are all a trader needs in order to determine his future trading performance. The combination of risk:reward ratio and winrate is one of the most powerful concepts in trading.

14. Making claims such as: “Make up to $2000 per day daytrading”
Talking about absolute numbers in trading is an easy sign that someone is trying to scam you. A possible return can only be stated in percentages. However, without talking about the risk involved, stating potential profits is a pointless and dangerous thing.

15. Blaming HFT and algorithm trading for your inability to make money
HFT and algorithms are not the reason why you cannot make money. High Frequency Trading and trading algorithms are nothing but new technologies that change the way the game is being played. Traders were scared that the telephone, computers and the internet are going to destroy trading opportunities. Go back to #8 and read it again.

16. Believing in price forecasts
“If someone knew that the price will go to $40 tomorrow, it would go to $40 today.” It is impossible to predict where price is going to go in the future. Because of the numbers of traders, economists or so-called ‘trading gurus’ and the amount of forecasts, you will always find a handful of people that guessed right. Don’t blindly follow someone who was plain lucky.

17. You use the words casino, boring, firework, killing it to describe your trading day
Markets go up and they go down, sometimes they move fast and sometimes a little bit slower, but it is the nature of how financial markets behave. However, if you are trading because of a thrill and excitement, you won’t last long in this business. Adopt a professional mindset and use appropriate language to avoid emotional trading.

18. You use absolute words like never and always to talk about what is going to happen
Using absolute terms in trading is a very dangerous thing to do, always! If you have seen that a certain setup has worked 100% out of the last 20 times, it can very easily fail when it occurs the next time. And just because you have never seen prices going sharply against you, it is still not an excuse to not use a stop loss order or take a bigger position.

19. Using the words ‘hope”, “wish” or ‘feel’ when talking about a trade
If you hear yourself saying or thinking that you hope or wish that price is behaving in a certain way, exit your trade immediately and do not trade any further. Traders have to rely on hard facts and trade based on actual statistics of proven methods. Trading based on emotions is a major reason why retail traders fail consistently.

Risk & Money Management

20. You watch your floating P&L
While being in a trade, do not watch your account go up and down with every tick. It will result in emotional trading decisions.

21. Thinking about what you can do with the current profit or what you could have done with the loss you could take
Only risk what you are can lose comfortably. Trading too big results in trading decisions that are based on fear and greed, the two biggest enemies of traders. On the other hand, trading too small makes you sloppy and more likely to abandon trading rules and risk management.

22. Not paying attention to correlations and how they increase your risk
Financial markets are highly correlated. Traders often believe that by taking several trades in different instruments they are diversifying and lowering their risk. What these traders don’t realize is that, especially if your trading instruments are somehow related, they often move in sync and instead of decreasing your risk, you are actually increasing it.

23. Using a fixed stop loss with the same pip amount on different instruments
Traders who use a fixed stop loss with the same pip amount on different instruments and/or different timeframes haven’t understood the rules of the game. There are no shortcuts to trading success and developing a sophisticated and tested stop loss strategy is just as important as knowing when to enter a trade.

24. Underestimating the significance of drawdowns and their statistical likelihood
Most traders believe that if a trading strategy has 5, 6 or 7 losers in a row, it cannot be a good trading strategy. What if we told you that a trading strategy is still valid after 10 losing trades in a row?

25. Adding to losing positions
This is a big no-go! Learn to take losses because they are normal. Trying to delay the realization of losses is the death sentence for your trading account.

26. Risking an arbitrary number of 2% on each single trade
Setups vary in quality and your position size should account for that. Learn to distinguish between different qualities of setups and entries and use a professional position sizing approach.

27. Ignoring the importance of spread
Research discovered that only about 1% of all day traders are able to predictably profit net of fees. Spread is the cost of doing business as a trader and, therefore, finding ways to minimize your costs should be high on your priority list.

28. Holding losers while selling winners
Research discovered the so-called disposition effect which states that on average, traders sell winning trades 50% faster than they hold losing traders.

29. Trading an account that is not the right size for you
Whether your trading account is too big or too small, both scenarios are less than optimal and have negative effects on trading performance because they are the cause of emotional trading decisions.

30. Denying the importance of math and statistics in trading
Math and statistics are boring and hard, but it does not matter whether you like it or not, as a trader you have to understand the basic math concepts. In the end, trading is nothing but juggling with probabilities, calculating odds and trying to move them in your favor.

Trade Management

31. Not having a trade checklist
Especially for beginning traders, having a checklist that you go through before you enter a trade can significantly increase your performance. A checklist can keep you out of trades that do not match your criteria and increase your discipline easily.

32. Widening your stop loss order when you see price going against you
This is another no-go. Your stop loss is the place where you accept that your trade idea is wrong. Widening a stop loss orders signals that your emotional responses have taken over and that you cannot make sound trading decisions anymore.

33. Using mental stops because you think it gives you more flexibility
A mental stop loss has no advantages whatsoever. None!

34. Pulling your stop loss order to breakeven
Unless it is part of your trading strategy and you can statistically verify that moving a stop loss to breakeven is the optimal approach, don’t do it. Moving a stop loss to break even is a sign that you are afraid of taking a loss and giving back profits.

35. Moving your stops too close
Price moves in waves and you have to give your trades room to ‘breathe’. Moving a stop loss too close to current price will often get you out of trades that would have gone to your take profit order. Learn to distinguish between minor retracements and reversals.

36. Using the big round numbers or famous moving averages for your stop loss placement
Research showed that price behaves significantly different at round numbers and that the reversal frequency is higher in such places as well. The professional players are aware of the fact that retail traders are lazy and just pick what is obvious and easy and it is even more easy to use this knowledge to their own advantage.

Common Sense

37. Expecting to become rich any time soon
The trading industry created the illusion that with enough leverage, the right trading strategy and some luck you can make a lot of money easily. However, even after years of losing money month after month, ‘traders’ still believe that the only reason they have not become a millionaire is because they haven’t found the right strategy yet. Wake up!

38. Not treating trading like a business
Trading is not necessarily hard or difficult, but the approach of the average trader makes it impossible to earn profits from trading. Testing different ideas, calculating and analyzing data, tweaking, continuous self-improvement, preparation, journaling and discipline are all the things the regular trader does not want to hear about and that is exactly why more than 99% of all traders will never make money.

39. Buying a $10 EA
At one point, traders will give up trading themselves and start looking for trading robots or EAs to make them rich. They then buy a $10 trading robot from a random website or from an unknown guy in some trading forum without even understanding what the robot does and start trading their own money. If you still don’t know why this is a bad idea, you have to find out for yourself.

40. Believing that price cannot move higher/lower
Even when price has been in a prolonged rally for several months, you will always find traders who week after week tell you that the turn is imminent and they are looking for short entries. Traders would do well to focus on what is obvious and join the trend as long as it is possible.

41. Trading your own money and savings after 3 months of demo trading
Even people who have been to college or university and who spend years to prepare for a job and then worked their way up are among those traders that open a demo account, take some random trades and then after 3 months of mixed results start trading their own savings. The possibilities that trading offers are limitless and can blind people, but the pitfalls are just as big and the next margin-call is just one click away.

42. Cursing Indicators while praising candlesticks
Whether you are trading price action or are a follower of indicator-based trading strategies, it does not make a difference to your chance of success as a trader. Although people will tell you otherwise, the strategy you choose has no impact on your trading success. It comes down to how you apply the strategy, tweak the parameters and manage yourself as a trader.

43. Analyzing your performance on a daily basis
Do not try to be profitable every single day, week or month. Trading is a long term activity and you do not have any influence on the outcome of your trades. Your only responsibility as a trader is to find a method that has a positive expectancy, religiously apply it and constantly monitor every little aspect of your performance. Do not try to force winning trades, the markets will show you who the boss is.

44. Following advice from random people
Never ever take trades based on opinions, tweets or promises made by other people. “Give a man a fish, and you feed him for a day; show him how to catch fish, and you feed him for a lifetime.”

Common Investor and Trader Blunders

Words of Caution for the Novice

Making mistakes is part of the learning process when it comes to trading or investing. Investors are typically involved in longer-term holdings and will trade in stocks, exchange-traded funds, and other securities. Traders generally buy and sell futures and options, hold those positions for shorter periods, and are involved in a greater number of transactions.

While traders and investors use two different types of trading transactions, they often are guilty of making the same types of mistakes. Some mistakes are more harmful to the investor, and others cause more harm to the trader. Both would do well to remember these common blunders and try to avoid them.

No Trading Plan

Experienced traders get into a trade with a well-defined plan. They know their exact entry and exit points, the amount of capital to invest in the trade and the maximum loss they are willing to take.

Beginner traders may not have a trading plan in place before they commence trading. Even if they have a plan, they may be more prone to stray from the defined plan than would seasoned traders. Novice traders may reverse course altogether. For example, going short after initially buying securities because the share price is declining—only to end up getting whipsawed.

Chasing After Performance

Many investors or traders will select asset classes, strategies, managers, and funds based on a current strong performance. The feeling that “I’m missing out on great returns” has probably led to more bad investment decisions than any other single factor.

If a particular asset class, strategy, or fund has done extremely well for three or four years, we know one thing with certainty: We should have invested three or four years ago. Now, however, the particular cycle that led to this great performance may be nearing its end. The smart money is moving out, and the dumb money is pouring in.

Not Regaining Balance

Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors.

However, a portfolio allowed to drift with market returns guarantees that asset classes will be overweighted at market peaks and underweighted at market lows—a formula for poor performance. Rebalance religiously and reap the long-term rewards.

Ignoring Risk Aversion

Do not lose sight of your risk tolerance or your capacity to take on risk. Some investors can’t stomach volatility and the ups and downs associated with the stock market or more speculative trades. Other investors may need secure, regular interest income. These low-risk tolerance investors would be better off investing in the blue-chip stocks of established firms and should stay away from more volatile growth and startup companies shares.

Remember that any investment return comes with a risk. The lowest risk investment available is U.S. Treasury bonds, bills, and notes. From there, various types of investments move up in the risk ladder, and will also offer larger returns to compensate for the higher risk undertaken. If an investment offers very attractive returns, also look at its risk profile and see how much money you could lose if things go wrong. Never invest more than you can afford to lose.

Forgetting Your Time Horizon

Don’t invest without a time horizon in mind. Think about if you will need the funds you are locking up into an investment before entering the trade. Also, determine how long—the time horizon—you have to save up for your retirement, a downpayment on a home, or a college education for your child.

If you are planning to accumulate money to buy a house, that could be more of a medium-term time frame. However, if you are investing to finance a young child’s college education, that is more of a long-term investment. If you are saving for retirement 30 years hence, what the stock market does this year or next shouldn’t be the biggest concern.

Once you understand your horizon, you can find investments that match that profile.

Not Using Stop-Loss Orders

A big sign that you don’t have a trading plan is not using stop-loss orders. Stop orders come in several varieties and can limit losses due to adverse movement in a stock or the market as a whole. These orders will execute automatically once perimeters you set are met.

Tight stop losses generally mean that losses are capped before they become sizeable. However, there is a risk that a stop order on long positions may be implemented at levels below those specified should the security suddenly gap lower—as happened to many investors during the Flash Crash. Even with that thought in mind, the benefits of stop orders far outweigh the risk of stopping out at an unplanned price.

A corollary to this common trading mistake is when a trader cancels a stop order on a losing trade just before it can be triggered because they believe that the price trend will reverse.

Letting Losses Grow

One of the defining characteristics of successful investors and traders is their ability to take a small loss quickly if a trade is not working out and move on to the next trade idea. Unsuccessful traders, on the other hand, can become paralyzed if a trade goes against them. Rather than taking quick action to cap a loss, they may hold on to a losing position in the hope that the trade will eventually work out. A losing trade can tie up trading capital for a long time and may result in mounting losses and severe depletion of capital.

Averaging Down or Up

Averaging down on a long position in a blue-chip stock may work for an investor who has a long investment horizon, but it may be fraught with peril for a trader who is trading volatile and riskier securities. Some of the biggest trading losses in history have occurred because a trader kept adding to a losing position, and was eventually forced to cut the entire position when the magnitude of the loss became untenable. Traders also go short more often than conservative investors and tend toward averaging up, because the security is advancing rather than declining. This is an equally risky move that is another common mistake made by a novice trader.

The Importance of Accepting Losses

Far too often investors fail to accept the simple fact that they are human and prone to making mistakes just as the greatest investors do. Whether you made a stock purchase in haste or one of your long-time big earners has suddenly taken a turn for the worse, the best thing you can do is accept it. The worst thing you can do is let your pride take priority over your pocketbook and hold on to a losing investment. Or worse yet, buy more shares of the stock. as it is much cheaper now.

This is a very common mistake, and those who commit it do so by comparing the current share price with the 52-week high of the stock. Many people using this gauge assume that a fallen share price represents a good buy. However, there was a reason behind that drop and price and it is up to you to analyze why the price dropped.

Believing False Buy Signals

Deteriorating fundamentals, the resignation of a chief executive officer (CEO), or increased competition are all possible reasons for a lower stock price. These same reasons also provide good clues to suspect that the stock might not increase anytime soon. A company may be worth less now for fundamental reasons. It is important to always have a critical eye, as a low share price might be a false buy signal.

Avoid buying stocks in the bargain basement. In many instances, there is a strong fundamental reason for a price decline. Do your homework and analyze a stock’s outlook before you invest in it. You want to invest in companies that will experience sustained growth in the future. A company’s future operating performance has nothing to do with the price at which you happened to buy its shares.

Buying With Too Much Margin

Margin—using borrowed money from your broker to purchase securities, usually futures and options. While margin can help you make more money, it can also exaggerate your losses just as much. Make sure you understand how the margin works and when your broker could require you to sell any positions you hold.

The worst thing you can do as a new trader is become carried away with what seems like free money. If you use margin and your investment doesn’t go the way you planned, then you end up with a large debt obligation for nothing. Ask yourself if you would buy stocks with your credit card. Of course, you wouldn’t. Using margin excessively is essentially the same thing, albeit likely at a lower interest rate.

Further, using margin requires you to monitor your positions much more closely. Exaggerated gains and losses that accompany small movements in price can spell disaster. If you don’t have the time or knowledge to keep a close eye on and make decisions about your positions, and their values drop then your brokerage firm will sell your stock to recover any losses you have accrued.

As a new trader use margin sparingly, if at all; and only if you understand all of its aspects and dangers. It can force you to sell all your positions at the bottom, the point at which you should be in the market for the big turnaround.

Running With Leverage

According to a well-known investment cliché, leverage is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Just as you shouldn’t run with scissors, you shouldn’t run to leverage. Beginner traders may get dazzled by the degree of leverage they possess—especially in forex (FX) trading—but may soon discover that excessive leverage can destroy trading capital in a flash. If a leverage ratio of 50:1 is employed—which is not uncommon in retail forex trading—all it takes is a 2% adverse move to wipe out one’s capital. Forex brokers like IG Group must disclose to traders that more than three-quarters of traders lose money because of the complexity of the market and the downside of leverage.

Following the Herd

Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much for hot stocks or may initiate short positions in securities that have already plunged and may be on the verge of turning around. While experienced traders follow the dictum of the trend is your friend, they are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to take a contrarian approach when required.

Keeping All Your Eggs in One Basket

Diversification is a way to avoid overexposure to any one investment. Having a portfolio made up of multiple investments protects you if one of them loses money. It also helps protect against volatility and extreme price movements in any one investment. Also, when one asset class is underperforming, another asset class may be performing better.

Many studies have proved that most managers and mutual funds underperform their benchmarks. Over the long term, low-cost index funds are typically upper second-quartile performers or better than 65%-to-75% of actively managed funds. Despite all of the evidence in favor of indexing, the desire to invest with active managers remains strong. John Bogle, the founder of Vanguard, says it’s because: “Hope springs eternal. Indexing is sort of dull. It flies in the face of the American way [that] “I can do better.'”

Index all or a large portion (70%-to-80%) of your traditional asset classes. If you can’t resist the excitement of pursuing the next great performer, then set aside about 20%-to-30% of each asset class to allocate to active managers. This may satisfy your desire to pursue outperformance without devastating your portfolio.

Shirking Your Homework

New traders are often guilty of not doing their homework or not conducting adequate research, or due diligence, before initiating a trade. Doing homework is critical because beginning traders do not have the knowledge of seasonal trends, or the timing of data releases, and trading patterns that experienced traders possess. For a new trader, the urgency to make a trade often overwhelms the need for undertaking some research, but this may ultimately result in an expensive lesson.

It is a mistake not to research an investment that interests you. Research helps you understand a financial instrument and know what you are getting into. If you are investing in a stock, for instance, research the company and its business plans. Do not act on the premise that markets are efficient and you can’t make money by identifying good investments. While this is not an easy task, and every other investor has access to the same information as you do, it is possible to identify good investments by doing the research.

Buying Unfounded Tips

Everyone probably makes this mistake at one point or another in their investing career. You may hear your relatives or friends talking about a stock that they heard will get bought out, have killer earnings or soon release a groundbreaking new product. Even if these things are true, they do not necessarily mean that the stock is “the next big thing” and that you should rush into your online brokerage account to place a buy order.

Other unfounded tips come from investment professionals on television and social media who often tout a specific stock as though it’s a must-buy, but really is nothing more than the flavor of the day. These stock tips often don’t pan out and go straight down after you buy them. Remember, buying on media tips is often founded on nothing more than a speculative gamble.

This isn’t to say that you should balk at every stock tip. If one really grabs your attention, the first thing to do is consider the source. The next thing is to do your own homework so that you know what you are buying and why. For example, buying a tech stock with some proprietary technology should be based on whether it’s the right investment for you, not solely on what a mutual fund manager said in a media interview.

Next time you’re tempted to buy based on a hot tip, don’t do so until you’ve got all the facts and are comfortable with the company. Ideally, obtain a second opinion from other investors or unbiased financial advisors.

Watching Too Much Financial TV

There is almost nothing on financial news shows that can help you achieve your goals. There are few newsletters that can provide you with anything of value. Even if there were, how do you identify them in advance?

If anyone really had profitable stock tips, trading advice, or a secret formula to make big bucks, would they blab it on TV or sell it to you for $49 per month? No. They’d keep their mouth shut, make their millions and not need to sell a newsletter to make a living. Solution? Spend less time watching financial shows on TV and reading newsletters. Spend more time creating—and sticking to—your investment plan.

Not Seeing the Big Picture

For a long-term investor, one of the most important but often overlooked things to do is a qualitative analysis or to look at the big picture. Legendary investor and author Peter Lynch once stated that he found the best investments by looking at his children’s toys and the trends they would take on. The brand name is also very valuable. Think about how almost everyone in the world knows Coke; the financial value of the name alone is therefore measured in the billions of dollars. Whether it’s about iPhones or Big Macs, no one can argue against real life.

So pouring over financial statements or attempting to identify buy and sell opportunities with complex technical analysis may work a great deal of the time, but if the world is changing against your company, sooner or later you will lose. After all, a typewriter company in the late 1980s could have outperformed any company in its industry, but once personal computers started to become commonplace, an investor in typewriters of that era would have done well to assess the bigger picture and pivot away.

Assessing a company from a qualitative standpoint is as important as looking at its sales and earnings. Qualitative analysis is a strategy that is one of the easiest and most effective for evaluating a potential investment.

Trading Multiple Markets

Beginning traders may tend to flit from market to market—that is, from stocks to options to currencies to commodity futures, and so on. Trading multiple markets can be a huge distraction and may prevent the novice trader from gaining the experience necessary to excel in one market.

Forgetting About Uncle Sam

Keep in mind the tax consequences before you invest. You will get a tax break on some investments such as municipal bonds. Before you invest, look at what your return will be after adjusting for tax, taking into account the investment, your tax bracket, and your investment time horizon.

Do not pay more than you need to on trading and brokerage fees. By holding on to your investment and not trading frequently, you will save money on broker fees. Also, shop around and find a broker that doesn’t charge excessive fees so you can keep more of the return you generate from your investment. Investopedia has put together a list of the best discount brokers to make your choice of a broker easier.

The Danger of Over-Confidence

Trading is a very demanding occupation, but the “beginner’s luck” experienced by some novice traders may lead them to believe that trading is the proverbial road to quick riches. Such overconfidence is dangerous as it breeds complacency and encourages excessive risk-taking that may culminate in a trading disaster.

From numerous studies, including Burton Malkiel’s 1995 study entitled: “Returns From Investing In Equity Mutual Funds,” we know that most managers will underperform their benchmarks. We also know that there’s no consistent way to select, in advance, those managers that will outperform. We also know that very few individuals can profitably time the market over the long term. So why are so many investors confident of their abilities to time the market and/or select outperforming managers? Fidelity guru Peter Lynch once observed: “There are no market timers in the Forbes 400.”

Inexperienced Day Trading

If you insist on becoming an active trader, think twice before day trading. Day trading can be a dangerous game and should be attempted only by the most seasoned investors. In addition to investment savvy, a successful day trader may gain an advantage with access to special equipment that is less readily available to the average trader. Did you know that the average day-trading workstation (with software) can cost in the tens of thousands of dollars? You’ll also need a sizable amount of trading money to maintain an efficient day-trading strategy.

The need for speed is the main reason you can’t effectively start day trading with the extra $5,000 in your bank account. Online brokers’ systems are not quite fast enough to service the true day trader; literally, pennies per share can make the difference between a profitable and losing trade. Most brokerages recommend that investors take day-trading courses before getting started.

Unless you have the expertise, a platform, and access to speedy order execution, think twice before day trading. If you aren’t very good at dealing with risk and stress, there are much better options for an investor who’s looking to build wealth.

Underestimating Your Abilities

Some investors tend to believe that they can never excel at investing because stock market success is reserved for sophisticated investors only. This perception has no truth at all. While any commission-based mutual fund salesmen will probably tell you otherwise, most professional money managers don’t make the grade either, and the vast majority underperform the broad market. With a little time devoted to learning and research, investors can become well-equipped to control their own portfolios and investing decisions, all while being profitable. Remember, much of investing is sticking to common sense and rationality.

Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs of large institutional investors. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better than the so-called investment gurus. Don’t assume that you are unable to successfully participate in the financial markets simply because you have a day job.

The Bottom Line

If you have the money to invest and are able to avoid these beginner mistakes, you could make your investments pay off; and getting a good return on your investments could take you closer to your financial goals.

With the stock market’s penchant for producing large gains (and losses), there is no shortage of faulty advice and irrational decision making. As an individual investor, the best thing you can do to pad your portfolio for the long term is to implement a rational investment strategy that you are comfortable with and willing to stick to.

If you are looking to make a big win by betting your money on your gut feelings, try a casino. Take pride in your investment decisions, and in the long run, your portfolio will grow to reflect the soundness of your actions.

Top 5 Major Trading Mistakes and How to Avoid Them

This Video will help advanced and beginning traders avoid Major Trading Mistakes. This is the first in a series of training videos focusing on “How To Get Started Trading in the Stock Market”.

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