Starting out on a new road which is full of pitfalls and dead ends is never an easy task. The same can be said of your first foray into trading on the stocks and shares markets. Don’t make the mistake of stepping out blindly into the road. Read GOODWILL INDIA’s helpful tips on how to become a good trader. This article aims to give you some tips on what are some of the mistakes to avoid for trading. The examples are based on identified common mistakes that are frequently made by inexperienced traders.
INVESTING MORE THAN YOU CAN AFFORD
Always make sure you have enough reserve funds to live your life should something go horribly wrong with your investments. Do not invest every single penny and leave yourself short of ready cash for day-to-day living. Remember that investment always has an element of risk involved, so only invest what you can afford to lose.
PLAN YOUR INVESTMENT
Do not randomly invest, but talk to a professional investment planner about your aspirations, time scale and situation. Those with a robust plan in place almost always outperform chancers who scrabble around aimlessly, so draw up a plan and stick to it.
BE PATIENT AND HAVE CONFIDENCE
Short term gains sound very attractive but in reality they are very risky. Be patient, and reduce the risk of loss. At least until you are an experienced trader, try to stick to long term goals. Don’t expect instant rises, and don’t get impatient and liquefy your stocks while they are climbing, however slowly.
DON’T BE OVER-CONFIDENT AND TAKE UNDUE RISKS
Similar to the above point, it is common that after a few good trades, inexperienced traders often tend to get overly confident. The markets are dangerous and unpredictable places, so never assume that what worked once will work again. If the markets were able to be anticipated and beaten consistently then they would not serve any purpose.
DO NOT FALL FOR ‘TRICKS’ TO GET RICH QUICK
As mentioned in the above point, there are no ‘tricks’ that can be relied upon. If there were, then all traders would be rich and the markets would be broken. Do not fall for such fake claims.
DO NOT TAKE LOANS IN ORDER TO INVEST
When you invest money, you should always be mindful that that money can be lost, even if there is only a very slim chance of that happening. You should only ever invest money that you can afford to lose. In fact when opening your trading account, a responsible broker should check that you are financially sound, and able to survive in the event of your trading account getting wiped out. Only use your own money, and not that borrowed from third parties, as it will only end in disaster if the money is lost and you are left in a position where you are unable to repay loans.
PREDICTIONS ARE ONLY PREDICTIONS
You will find endless numbers of stock analysts, analytical software, and websites. Always remember that these can only make predictions. They can not give you any guarantees. While it can be useful to take information from these sources, they can not be fully relied upon. The end decision to buy or sell is always yours, and you are the only person to thank or to blame according to the outcome.
GET OUT QUICKLY
Don’t assume that plunging stocks will recover. Get out when they start to drop. As long as you sell for more than you bought, you are a winner. Remember that if they start to climb, you can always buy them again. Limiting your losses is one key skill that all traders need to learn.
HEDGE RISK BY CREATING A PORTFOLIO
You will surely have heard the phrase ‘don’t keep all your eggs in one basket’. If that basket is dropped, you lose all your eggs. Similarly in stocks and shares, you should diversify in as many areas as you can. This will limit the loss if one particular investment crashes.
DON’T RELY ON PAST HISTORY
The world is a fast changing place. Year by year new companies rise up and established companies fail and die. When deciding where to buy shares, don’t simply base your decisions on past glories of a company. Read carefully into the company profile and their plans for the future to satisfy yourself whether or not each company has the framework in place to continue to succeed into the future. Don’t bet on a lame horse, even if it was a former champion.
We hope you enjoyed reading about some of the common mistakes made by new traders, and that you are able to make use of the knowledge you have gained. If you are thinking of beginning your investment career, you may be wondering which share brokers help you for good trading. It is a good question, because very often brokers only exist to take your money and leave you to your own devices. GOODWILL INDIA are different however. GOODWILL INDIA care about the customer’s success, and take great efforts to help ensure you maximise your full potential. With daily webinars addressing different aspects of trading, providing beneficial advice from professionals, trading tips sent directly by SMS, and friendly, knowledgeable customer service advisors, GOODWILL INDIA welcome you into their family. For further information check out www.gwcindia.in or give them a call on +91 80122 78000.