Mistakes are very common in the business world. Most experienced businessmen will almost always have an account of some of the memorable mistakes that they made when starting their career. Mistakes help investors learn about the market and how they should approach new challenges. While it is nice to view trading mistakes as learning opportunities, there should be a limit to what is acceptable. Some terrible mistakes might not necessarily provide a learning opportunity but would rather bring total destruction to the business. When you are an investor, it is important to know which common mistakes you should totally avoid. Here is a look at 5 terrible trading mistakes that rookie traders keep making.
Not letting go of loss-making assets
Some traders make the mistake of developing an attachment to all their investments. This makes it harder for them to part with losing assets even when the right time to sell comes. In the world of investment, you should always remember that assets are only worth keeping when they are making profits for you. No matter how much expectation you might have had on a particular set of assets, you should never ignore the market signals. There is no single experienced investor who has not been faced with a situation when they had to make tough decisions. Rookie investors tend to believe that they cannot make mistakes and this can be very costly.
Trying to predict the direction of the market
This is a common mistake that is especially made by rookies in the trading markets. A lot of inexperienced traders tend to time the market leading to catastrophic results. The market is very dynamic and all investors need to stay vigilant in order to protect their assets. The best way to avoid rash predictions would be to rely on market data that has a historical backing. Even with such data, it is important to realize that the market is always full of surprises. You must, therefore, have a fully-fledged strategy that informs you on when to enter the market and when to make an exit.
Selling assets prematurely
A lot of rookies tend to be swayed by temporary market signals. The volatility levels in any particular trading day can be perceived in many different ways. As reported by Admiral Markets, there are always highs and lows that will be recorded within a specific trading period. The changes in volatility do not necessarily mean that the market will not settle after a while. Inexperienced traders tend to have much more doubts and thus tend to make abrupt moves that end up being costly. When you are an investor, you need to develop a certain level of patience and hardiness. You need to also develop the ability to see which signals are temporary and which ones are permanent. Making this distinction can help increase your profit margins and protect you from losses.
Looking at investments in monetary terms only
It is common for investors to look at their assets only in terms of monetary value. This forces them to make unwarranted decisions in an effort to protect the money. A particular mistake rookies make is failing to move out of a position simply because they have lost some money which they hope to recover from that position.
When you are investing, you need to view your money as an investment tool and not just the final product of investment. This perspective allows you to be more flexible in what you do with the money. Viewing money as a tool can prevent you from developing a desire to follow your money wherever it is and instead focus on following the markets which can result in an increase of the money.
Always buying at low positions
Investors always hope to make profits and thus look for the best ways to enter the market from a point of advantage. This is partly why most rookie investors always wait for the next dip in order to buy assets. This might not always be a great move however. The market is always on a constant move and the next dip cannot always guarantee returns. It is not in every instance where buying low can result in profits. Sometimes, the market is just on a slight dip in a generally upward trend or vice versa. The best strategy thus is to always rely on charts and market data to make investments.
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Source: Home Business Money