Share market, a huge financial blow to many and deep losses to someone. You might have heard of people becoming millionaires by online trading and also losing their everything.
It’s comparatively easy to lose your money rather than become a gainer. Many online traders make some mistakes that lead them to financial losses. Obviously, people do lots of research before entering the share market. They read financial news and listen to experts’ advice, and still, they lose their money because of some mistakes.
In this article, we have curated some common mistakes that often become devastating. If you are a newbie to online trading, this article might be very helpful for you. So, let’s get straight to the point.
The number one point you should follow is,
Implement stop loss strategy:
One of the biggest risks that beginners take while entering the market is not implementing the stop-loss strategy. Especially, when you are trading intraday, where shares fluctuate a lot in a matter of minutes, using the stop loss is inevitable.
Haven’t heard of stop loss? Don’t worry, we are below describing that matter in simple words.
Stop loss is mainly used to avoid sudden market crashes. It is actually a price point where you are going to sell your shares. Suppose you buy a share at $5 and set the stop loss at $5 or $6. Now, during the fluctuation, if the share price touches your selected amount, it will automatically sell your shares.
Now, what is the benefit?
Before reaching your purchased value, it gets sold, so you don’t lose any money either. On the other hand, if the share rises and then suddenly starts getting down, after a certain profit margin you automatically sell it. That’s a very clever move where you do not need to stay in front of the display.
For people who don’t have much time to look at stocks all the time, this stop-loss strategy is very beneficial to stop losing your money even though the market is crashing.
Don’t trust your stock broker blindly:
Most investors invest their money through investment brokers. If you are interested in the share market and want to invest, you contact the brokerage firm. Brokers first convince you and when you start investing your money, they work as a guide for you. They share all the vital and sometimes core information from the market. Many people blindly believe in their advice, and buy and sell according to their advice. But, it does not necessarily mean their opinions will always bring a smile to your face. Many times, their advice may lead to losing your hard-earned money. Before taking any decision if possible cross-checks their advice with someone else.
Try to skip the short-term investments:
Many people describe the share market as an addiction and for good reason. As many people get rich quickly by making the right decisions, others end up gaining nothing and sometimes they run in the negative. More or less short-term investments are always at high risk be it a newbie or an experienced trader. Into intraday trading within a couple of minutes share prices drop and rise. So, it is always a tough task to predict whether the shares are likely to go up or down. In the long term, you get a graph and can decide about the future much easier. So, choosing short-term investments is riskier.
Don’t come to the field without any knowledge:
Be it a business or investments, having knowledge is inevitable in that field. Besides other things, when you are going to invest money in shares, you need to have some basic knowledge before you start otherwise chances are you will surely lose your hard-earned money. Every day so many people put their money into the market. You may have heard people who are so experienced still lose their hard-earned money with some mistakes.
The market is risky enough and simple miscalculation or misinformation may be devastating. So, before you invest in the market, you need to have a basic idea about the market or where you are going to invest your money. So, it is better to stay away from investing unless you gain some basic knowledge about it.
Investing without investigating properly:
Everyone who invests in the share market with the hope of good returns. But, many fail to gain so by embracing the wrong stocks. Just because a stock is rising high does not mean that it can give you long-term benefits. Every company has its timing, depending on various aspects, either its share price gets high or down.
You need to check all the previous financial periods of the company thoroughly. Besides, who are the key position holders in the company, their latest products and services, what size of the company, what shareholder pattern, and more? These points are vital to check before you buy stock in that company. Otherwise, chances are high to lose your money.
Don’t go opposite the flow:
When a company is on listing to the stock market, you can check its previous year’s graphs. If you see, it expresses the company’s situation in various moments. Yearly wise each company has its ups and downs. If you closely observe them, you can trace the trend. For example, a company which is producing air conditioning machines. Now, in summer the demand for ACs stays high and in winter it gets down.
Now, obviously, the price of the shares will rise when it is summer, and in the cold season, the share will go down. Now, that’s the trend that happens each year. So, most people buy or sell the share according to the trend, and no one should do something exceptional from the trend. Otherwise, it might put you into real trouble.
Don’t put all eggs in one bucket:
It’s a clever move to invest your money in different places rather than in a single one. To be honest, even after doing lots of research, there is always a chance of crashing the market. Now, if you diversify your investments, you lose some portion of your investment. Beginners always make this mistake. When they find that a share is giving very high returns, they put all their capital into that share. And all of a sudden when the share falls, they lose everything they got. So, go for multiple investment opportunities.
Don’t be too greedy:
We all invest our money in the share market with the hope of gaining profit. But some of us become so greedy that we take high risks and most of the time face huge losses instead of any profit either. Especially inexperienced investors become very greedy when they get some profits. When you book some profit, you still do not use your whole capital. Most newbies, when they make a profit, invest the whole capital and gain money together. But, that’s not a smart decision either.
These are some tips that you may need to follow if you do not want to lose your hard-earned money easily. As you gain more and more experience, you become an expert, and then chances are very low to book losses instead of profits.
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