July 7, 2017 /Finance Attitude/ -- Trading the financial instrument be extremely difficult if you don’t know how to trade the market properly. Most of the novice stock traders fail to make money in the stock market since they don’t know how to execute the best setup in the market. If you truly want to become a professional stock trader then you need to have strong determination, devotion, and dedication. Those who are trading the stock market for a long period of time and making consistent profit follow strict trading discipline in the market. In this article, we will be discussing some of the most common mistakes in stock trading.
Lack of trading discipline: Most of the novice traders fails to make a decent money by trading the different stocks in the market due to their lack of trading discipline in the market. Trading discipline greatly varies from trader to trader. It’s a specific set of rules which the traders use in their trading. For instance, risk management, frequency of trade, preferred time frame, and trading method are some of the things that need to be followed perfectly. By the word discipline we are referring to the pin perfect execution of your trading plan and under no circumstances, you should trade the market without adhering to the rules of your trading plan.
Ignoring the fundamental facts: If you consider stock trading as your full-time job then you need to have a strong grasp in the fundamental analysis section. Before buy or sell any stocks on the market make sure you know the fundamental factors very well. Fundamental factors help the stock traders to identify the economic performance of the country and different leading organizations. For instance, if you see that the reserve stock of the U.S crude is extremely high then you short the oil since excess supply will lead to the decrease of oil price. Let’s say that you are going to buy the stock of Apple but after one hour the organization is going to release their net growth in a press conference. So as a stock trader you should wait and see the result of the net growth of the stock of Apple.
Trading the smaller time frame: This is one of the most common mistakes in every novice stock trader. They always trade by using the smaller time frame in the market. In the eyes of trained professional stock trading gives the best return in the market when traded in the higher time frame. By using the higher time frame you will have a general overview of the trend and recent performance of a certain stock in the market. But if trade the smaller time frame you will have lots of false trading signal on the market. For example, let’s say that the Amazon stock rallied high in the last one month. But in last two trading days in went down so if you look at the smaller time frame then you will see bearish trend whereas the longer term trend is bullish. So trading the smaller time frame will often result in trading against the prevailing trend.
Overtrading: Overtrading is one most deadly enemy for the stock traders. The high failure rate in the novice traders is only due to the overtrading of the stock in the market. If you truly want to live your life by trading the stocks in the global market make sure that you never overtrade. As a professional stock trader, you should always concentrate on high-quality trade execution rather than quantity. If you don’t find any trade in the market then stay on the side line and wait for a better trading opportunity. There is no need to trade low-quality trade in the market since it will increase your risk to a great extent.