We have seen too many people losing money in the stock market and making mistakes. No matter how many times you say them that there is a mistake they won’t pay heed on it until they lose a big chunk of their cash. There is nothing wrong with or unusual about making mistakes and losing the money stock market in the initial phase. Actually, the biggest mistake you can make is not recognizing that you made a mistake and now it’s time to accept and learn from it. The most obvious clue that something is going wrong with your investments is that you are losing money continuously and still you are not learning any lessons.
Here I am going to cover the 10 most common and fatal mistakes people do in the stock market and lose money. By this article I want you to understand these mistakes and apply with you’re trading to minimize your loss and maximize your profit and learning.
Mistake #1: You Do Not Sell Your Losing Stocks
For a variety of reasons, some people hold onto their losing stocks too long and it looks like they are emotionally attached to that particular stock. Failure to get out of losing positions early is probably the number one reason why so many investing and traders are losing money. The reasons people hold onto losing stocks are primarily psychological. If you sell a stock for a loss, you stopped yourself from losing further. Adding insult to injury, you have to admit that you lost money. No matter what price you sold the stock at, it always seems as though you could have done better. This mistake needs to be avoided at all cost and on all stock position a target and stop-loss should be there based on your time-frame and you have to take that seriously.
Mistake #2: You Let Your Winning Stocks Turn into Losers
It is the most painful and unfortunate mistake you can make in the stock market where your winning positions will be converted into loosing. This can happen with investors as well as traders. Greed plays the lead role for this mistake to happen. After going into profit 20% or 30%, greed says why not 40% or 50% from here, and then the stock goes 0% or -10%. Here to avoid this mistake after going on the profit side you should either book your profit or you should use stop loss to ensure your profit if you are willing to hold it for some more time.
Mistake #3: You Get Too Emotional About Your Stock Picks
Not able to control their emotions is the main reason why most people should not participate in the stock market. When investing in the market with large money at stake, many people are filled with emotions that force them to make the wrong and erratic decisions. In fact, becoming too emotional about your investments then it is sure shot that you will lose money. I have seen many people go in the same stock again and again after losing money into it with a revenge attitude. If you are going to invest in the market, allowing your ego to get in the way of your investing is a dangerous sign.
Mistake #4: You Don’t Learn from Your Mistakes
Most experienced investors and traders know that you learn more from your losers instead of your winners. If you lose more than 10 percent in the market, there are a few things you can do. First, find a gap in your initial assessment before investment and keep that mistake in mind in all future investment and trade decisions. Next, closely review your investment strategy. You should study the entire market environment and analyze each of the stocks you are holding. If your investments don’t hold up based on technical and fundamental analysis, you should change your portfolio elements.
Mistake #5: You Bet All Your Money on Only One or Two Stocks
Putting you all eggs in a single basket means that there is a high chance that you will go hungry soon. One of the problems with investing directly in the stock market is that most people don’t have enough money to maintain a properly diversified portfolio. Although diversification limits your upside gains, it also protects you in case one of your investments does badly. Even in extreme cases, you gave to just buy one or two stocks then please buy big stocks with a low P/E ratio after doing a full fundamental and technical analysis.
Mistake #6: You Are Unable to Be Disciplined and Flexible
Almost every investor will rightly claim that a lack of discipline is the main reason that most people lose money in the market. If you are disciplined, you have a strategy, a plan, and a set of rules, and no matter what you are feeling, you stick to your strategy, plan, and rules. Discipline means having the knowledge to know what to do and the commitment and courage to actually do it. It means that you have to stick to your strategy and obey your rules.
Mistake #7: You Listen to or Get Tips from the Wrong People
If your eyes glaze over when you read about fundamental or technical analysis, there is a simpler way to find stocks to buy like stock tips or TV commentary from too many news channels. The beauty of tips is that you can make money without doing any work. If this sounds too good to be true, it is. In fact, one of the easiest ways to lose money in the market is by listening to tips and trading based on TV.
Mistake #8: You Aren’t Prepared for the Worst
Before you get into the market, you should be prepared, not scared. Although you should always hope for the best, you must be prepared for the worst. The biggest mistake many investors make is thinking that their stocks won’t go down or in the long run, they will make a profit. They are not prepared for an extended bear market, a recession, deflation, a market crash, or an unanticipated event that will ruin the market. You should create a crash-proof plan based on logic and study instead of greed or fear.
Mistake #9: You Follow the Crowd
If you study the lives of some of the successful traders and investors in the recent past, you will find that they often made their fortunes by doing the opposite of what the crowd was doing after applying their own study and strategy. That means buying when other people are selling and selling when other people are buying. Although the crowds can win, they don’t win for long.
Mistake #10: You Mismanage Money
Managing money is a difficult skill for most people, but it’s one of the most important skills to have. Unfortunately, if you can’t manage money, you’re destined to have financial problems. In the end, it’s not how much you make but how much you keep that matters. Do you want to know the secret to make money in the stock market or with any investment? Don’t lose money. Obviously, it’s not easy to find investments where you don’t lose money, but that shouldn’t stop you from trying.
So these are 10 most common mistakes which you should avoid and take a lesson from all these mistakes, follow these lessons like a saint and make your trade profitable.
Disclaimer: The opinions expressed in the Blog are for general informational and educational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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