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5 Trading Mistakes that New Traders Do

3 Mins 12 Jul 2024 0 COMMENT

If you are a trader, then ensure that you don’t commit these 5 mistakes that newbie traders do:

1. Wrong Return Expectations:

New traders often start with small capital, like 1-2 lakhs, expecting to earn at least 20-30 or even 50 thousand per month from trading so that their efforts don’t feel wasted. But do you know that expecting a return of 50k on a capital of 2 lakhs means an ROI of 25%? Fun fact: good traders often target a monthly return of 3-5%.

2. Trading without Stop Loss:

Trading without a stop loss is as risky as jumping out of a plane without a parachute – it’s as good as having a death wish.  

3. Overtrading:

Have you ever made money on a trade, then, driven by greed, placed another trade and ended up giving that profit back to the market? Over time, most traders realize that overtrading is their biggest enemy, especially when they enter trades impulsively without proper analysis or a specific plan. Traders begin to get good returns when they make trades at proper entry levels as per a pre-decided plan.

4. Not Having a System:

Most newbie traders buy whatever stock they like. With experience, you realize that following a rules-driven or systematic trading strategy is almost always a better idea. Systematic trading helps bring discipline and reduces the role of emotions in trading.

5. Not sticking to a System:

Every system will sometimes give you profits and sometimes losses. But good traders build the courage and conviction over time to stick with their system, even if they’re not making money at certain times. However, a new trader might panic and either stop trading or change systems altogether!