Mistakes To Avoid When Trading In Equities

DIVYA NAIR

05 Oct 2016

trade in Equities

While every trader wants to make maximum profit by trading in stocks, not everyone succeeds in doing so. A lot of traders many a times commit the most common mistakes due to lack of knowledge of stock market. In this article, we have highlighted such mistakes. Frequent traders as well as beginners can improve their trading patterns by learning if they also make such mistakes.

Mistakes To Avoid To Get Maximum Profit from Online Equity Trading-

1. No Plan

Buying stocks expecting higher profit without a well laid plan only leads to losses in the long-run. Traders must analyse the fundamentals of the company, right time to sell the purchased stock, the target price and stop losses, beforehand.

2. Inconsistent Trading Pattern

Another secret to success in stock trading is adopting an appropriate trading pattern and adhering to it in each trade execution. To find out if a method is right, traders can execute many trades at a time following a single pattern and see whether they gain or lose their money. That way traders can find ways to improve their trading strategy.

3. Price Rose Much, May Not Go Up Further

Following this wrong notion, a lot of traders end up selling stocks that they have purchased at a specific price. But the fact is, stock market is always moving somewhere and no one can have a single speculation on the price. Wise strategy would be to analyse a stock in terms of the nature of the company, valuation, future growth prospects etc.

4. Price Fell Too Much, May Not Fall Further

Retail traders tend to believe when a stock see a steep fall, the price may not correct any further. With this belief, traders choose to purchase the stock. However, stocks can get corrected to any level when the market fundamentals go wrong.

5. Trying To Catch The Top & Bottom

We cannot guess at what level a stock would make a top or bottom. Retail traders should determine the value and target price of a stock and buy it within 5% to 10% range of their estimated buy price.

6. Fail To Cut Losses

Many traders falls pray to this mistake wherein they ignore to cut their losses when a trade fails to generate expected returns. When this happens, such traders tend to hope that the market eventually goes back in their favor to prove they are right.

7. Taking Early Profits

One should exit his/her trades only when the time is right and at their exit signal only. Nevertheless, traders always must have a long-term investment horizon if a stock is good and promising.

8. To Have Bullish/Bearish Opinion

Many traders tend to have their own bullish or bearish opinion on the stocks they own. However, such opinions may or may not be correct as it extensively depends on market fundamentals.

9. To Have Blind Faith On Advisor

The primary job of investment advisors and fund managers are to guide their clients. But it is not guaranteed that they would always be right on their views. Traders are required to hold their own conviction over trades they want to execute.

Conclusion -

Be it experienced players or beginners, any type of traders have had already experienced or are most likely to commit the above mentioned mistakes while trading in stock market. Equity traders can maximize their profits by minimizing these mistakes in their day to day trading patterns.

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Mistakes To Avoid When Trading In Equities

by Santosh Jayram | Oct 05, 2016
trade in Equities

While every trader wants to make maximum profit by trading in stocks, not everyone succeeds in doing so. A lot of traders many a times commit the most common mistakes due to lack of knowledge of stock market. In this article, we have highlighted such mistakes. Frequent traders as well as beginners can improve their trading patterns by learning if they also make such mistakes.

Mistakes To Avoid To Get Maximum Profit from Online Equity Trading-

1. No Plan

Buying stocks expecting higher profit without a well laid plan only leads to losses in the long-run. Traders must analyse the fundamentals of the company, right time to sell the purchased stock, the target price and stop losses, beforehand.

2. Inconsistent Trading Pattern

Another secret to success in stock trading is adopting an appropriate trading pattern and adhering to it in each trade execution. To find out if a method is right, traders can execute many trades at a time following a single pattern and see whether they gain or lose their money. That way traders can find ways to improve their trading strategy.

3. Price Rose Much, May Not Go Up Further

Following this wrong notion, a lot of traders end up selling stocks that they have purchased at a specific price. But the fact is, stock market is always moving somewhere and no one can have a single speculation on the price. Wise strategy would be to analyse a stock in terms of the nature of the company, valuation, future growth prospects etc.

4. Price Fell Too Much, May Not Fall Further

Retail traders tend to believe when a stock see a steep fall, the price may not correct any further. With this belief, traders choose to purchase the stock. However, stocks can get corrected to any level when the market fundamentals go wrong.

5. Trying To Catch The Top & Bottom

We cannot guess at what level a stock would make a top or bottom. Retail traders should determine the value and target price of a stock and buy it within 5% to 10% range of their estimated buy price.

6. Fail To Cut Losses

Many traders falls pray to this mistake wherein they ignore to cut their losses when a trade fails to generate expected returns. When this happens, such traders tend to hope that the market eventually goes back in their favor to prove they are right.

7. Taking Early Profits

One should exit his/her trades only when the time is right and at their exit signal only. Nevertheless, traders always must have a long-term investment horizon if a stock is good and promising.

8. To Have Bullish/Bearish Opinion

Many traders tend to have their own bullish or bearish opinion on the stocks they own. However, such opinions may or may not be correct as it extensively depends on market fundamentals.

9. To Have Blind Faith On Advisor

The primary job of investment advisors and fund managers are to guide their clients. But it is not guaranteed that they would always be right on their views. Traders are required to hold their own conviction over trades they want to execute.

Conclusion -

Be it experienced players or beginners, any type of traders have had already experienced or are most likely to commit the above mentioned mistakes while trading in stock market. Equity traders can maximize their profits by minimizing these mistakes in their day to day trading patterns.

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