7 things to not do while trading
It is easy for everyone to enter a trade but sustaining it is tough. A lot of discipline and planning is required to stay in the race with viable earnings. It is important to trade slowly, patiently and logically, avoid losses thereby safeguarding your investments.
These are the seven things trader should not do while trading;
1. Risk huge amount of capital
Everyone has the expectations to earn high amount of money & for that reason, he or she believes in putting huge capital into a single trade. It is not always true that high investment will lead to greater gains. So it is always advisable to not put more 1% of the total capital into a single trade. Don’t put all your eggs in one basket.
2. Trading immediately after the news breaks out
The market may or may not react rationally to a particular news or event. So wait till the dust settles and see how stable trend emerges. One should analyze the event/happening and predict the market conditions after careful calculations. Failing to do so will lead to significant losses without anyone to blame.
3. Unrealistic expectations
The market is very dynamic and volatile. It might behave in anirrational manner at times. So it is necessary to have proper strategies to deal with it. Stock trading, should be considered as a business and not as a gamble. Having unrealistic expectations out of even the most performing trade can also prove fatal. Losses should be hedged wherever possible instead of riding on it.
4. Proper positioning
Many things happen around the world which will have an impact on the sharemarket. We can only assume what impact it will have, but we cannot predict what will occur in the future. So it is imperative to position yourself accordingly with sound trading strategies.
5. Stay focused on strategies rather than potential outcomes
Do not focus much on the obstacles and maintain a trading discipline. Try to focus on single strategy instead of trying different strategies. Always test your strategy beforehand before applying it in live trade. If you find it useful then only use it for livestock trading.
6. Entering the market at the time of closure
The incidents around the globe have a significant impact on the market. Entering the time of closure further increases the risk of trading. Because certain things are beyond our hands and failure to take this into account will lead to significant losses.
7. Method of averaging down
People do not have the intentions of averaging down when they enter the markets. However, when their expectation rises, then without realizing the outcomes, they start the concept of averaging down. Then they began to hold their positions for a more extended amount of time. They then dive deep into losses riding on them instead of booking them when possible. So avoid this practice, instead have careful prior calculations for hedging the maximum of losses.
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- Dec 08, 2023Read More