Are you a newbie in stock trading?
It’s true that everyone has to start somewhere to learn the ropes of stock trading. Those who regard themselves as an advanced trader need to cut some slack for you.
However, not because you’re a newbie, it doesn’t mean you should do silly and illogical actions without thinking over your actions.
I’d like to mention six common stock trading mistakes of newbies.
1. Some newbies buy now but set a target selling price later.
Before you buy a stock, set your entry price, stop loss price, and target selling price. Calculate your reward-to-risk ratio.
2. Some newbies are justifying instead of rectifying the situation.
Haven’t you noticed why many traders suddenly become long-term investors when the market is blood-red?
Come up with a trading plan before you enter a new position in any stock – and be brutal in sticking with it. When trading a speculative stock, do you set trailing stop loss points?
3. Some newbies do not average down even when that’s what the situation calls for.
Averaging down (or up) is not always the right thing to do. There’s a unique set of situations in every trading day of a stock. But when the situation calls for it, you should activate your “average down strategy”. I won’t elaborate on what makes a situation call for the “average down strategy” for that’s a topic I want to write separately.
When you ask the person why he is not averaging down, the response is, “Maybe later. I’d like to hit a breakeven price.”
When you dig deeper on what makes him reason out like that, you’ll find out that he is also guilty of newbie mistake # 1. He is clueless on whether or not averaging down is the right thing to do because he doesn’t have a target selling price. He is clueless of the upside percentage that he is vying for so he can’t position his actions logically and strategically.
4. Some newbies buy stocks but they do not know what’s buy-able with those stocks.
Ask yourself, “What did I see in this stock that convinced me to risk my money and invest in it?”
If you’re just scratching your head, you need to go back to the drawing board.
What’s buy-able with a sack of rice? It’s the staple food of my family.
What’s buy-able with a new pair of shoes? It’s a requirement in the dress code policy of your company.
Now, what’s buy-able with the stock that you bought?
5. Some newbies are still buying when everyone is preparing for a sell-off.
You don’t chase the stock all the way to the top without analyzing the situation. You need to check the volume, foreign fund flows, support and resistance zones, charts, and technical indicators for you to boost your confidence in whatever you do as a trader.
When you ask yourself, “Why am I still buying up?”, you should be able to convince yourself with your answers. Convincing one’s self is one of the hardest things to do. Don’t fool yourself.
6. Some newbies don’t like reading.
Congratulations if you reached this part! 🙂
When people ask basic questions about stock trading and investing, my favorite line is, “What have you read and learned so far? Please let me know so I’ll know where to start.”
Sometimes, I give links to articles. I also end my reply with a question to follow-up in the learning process of the person. If he didn’t reply back, that may mean he was only curious but not dead-serious to learn.
Some people are aggressive in asking but conservative in reading and doing a proactive research.
If you want to learn the skills of a stock trader, appreciate the value of reading in your day-to-day living. Learning how to trade is not a one-time deal. Every waking day is an invitation to read one article at a time. Be a regular visitor of my website. Read the thousands of articles I’ve written.
What did you learn from me today? Let me know in the comments.
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