In this article, we will talk about the common mistakes made by people who trade in the stock market. If you do not make the mistakes mentioned here without succumbing to your will, you can earn better money in the stock market in the long run.
Table of Contents
1. Deposit of borrowed money, loan or all savings
One of the most significant handicaps of novice investors who want to make money in the stock market and want to get rich quickly is investing all of their savings in a product that they do not have experience with, financial instruments they do not know, or weaknesses such as using loans and borrowing to make a lot of money quickly and in the stock market.
If you are not experienced enough in the stock market, do not invest all or almost all of your capital in the stock market first!
Give yourself some time to gain experience. The amount you will invest in the stock market should be an amount you will not need urgently in the short term. So, using the money you will not touch for a while is beneficial.
As a result; Entering the stock market with borrowed money, borrowed money or all your savings may be one of the biggest mistakes you will make. Don’t forget that, you will be alone in the end and nobody cares about your situation and excuses!
2. Buying stock from research
One of the common mistakes made in the stock market is buying stocks without research. It is necessary to analyze the company and have information about it to purchase shares. For example, deciding to buy stocks from the largest defense contractor, Lockheed, after researching that the U.S. and its allies have 3,100 F-35s on order through 2035, is a good move as its current agreement with the U.S. government makes it one of the best defense stocks for steady, long-term revenue. Buying the wrong stock is like a bad marriage. Stocks are easily bought, but the results can be disastrous.
3. To trade in one go
In the stock market, trading is usually done at once, but this technique is generally wrong. There is always a lower than a low and a higher than a high. Therefore, it is better to use the incremental technique and create an average cost when trading. So you can trade with better costs. You will also be protected from extreme movements in the stocks.
4. Connecting to shares
Creating an emotional bond with stock is one of the mistakes made. Because holding shares has become a passion. Stocks are tools for making money. The idea that the winning stock is good and the losing stock is bad is a thought that a good stockbroker should avoid. Because every stock wins with good timing. Clinging to winning stocks or trying to take revenge on losing stocks will only waste your time.
When you hold the shares of a company for a long time, and especially if that company has done well for a period, you may feel attached to that company. Never forget that you are in the stock market to make money and are buying this company’s shares for this purpose. And don’t be afraid to make a sale when necessary.
5. Investing all money in one instrument
Putting all the eggs in one basket can cause many eggs to break. Instead, you can reduce the risk of breakage by placing them in more than one basket. The same consideration applies to the stock market. You should never tie all of your money to a single stock. You have to determine a set of supplies and direct your investment accordingly.
Instead of making purchases from the same level simultaneously, make incremental purchases. In this way, you both distribute the risks and increase your earnings by evaluating different levels.
Also, when diversifying your portfolio, don’t forget to add high-yield financial instruments to your portfolio, even if it’s as little as 5% or 10%. Keeping short-term investment strategies such as binary options trading in your portfolio can provide you with liquid assets for your other investments. This is a strategy recommended by many financial experts to investors.
If you like aggressive investments and are considering adding binary options to your portfolio, you should know that deciding on your broker is vital. You can read here for the reviews of brokers and make your decision accordingly.
6. Losing emotional control
The most common mistake made in the stock market is losing emotional control. It’s like checking the stock every hour while you’re at a loss, deciding to sell one at night and then giving up on this decision, being optimistic for a moment and then pessimistic… If you’re in this situation, stay away from the stock market for a while because investors who lose emotional control will fail. In addition, this situation can affect your psychology and your private life.
7. Waiting for the stock to reach the same value again to sell, waiting for the stock
To rise to the same value to sell your depreciated stock is another mistake that evaporates your potential return. When this business behaviour is examined by behavioural science, it is called “cognitive error”. Investors lose in two ways by not realizing they are making a loss. By refraining from selling a declining stock, they are indifferent to the continued depreciation of the stock.
Second, they miss out on a potential return by not exercising the option to buy the stock, which will go up. For this reason, you should turn to another stock that you think will make a profit by selling a share lost at the rates you previously determined.
8. Investing with friendly advice
It is a fact that people who trade in the stock market or who have just started investing make most of their investment decisions based on hearsay and peer advice. The point that does not come to the mind of the investor when receiving this advice is why he is still not in the winners’ club, although the spouse and friend have enough knowledge to give advice.