7 Mistakes to Avoid – Trading in Shares and Stock

1. Trading with money you can’t afford to lose

Using the money you can’t really afford to lose remains one of the greatest hindrances to successful trading. Money that is meant for school tuition or mortgage or health insurance is a good example of his type of misappropriation of fund. Trading with money you can’t afford to lose is a bad approach to wealth building through stock investment.

2. The need to be certain

There is the need for us to be sure that the trade we want to make would be successful or profitable. Hence we seek for signs or indicators that point to the profitability of our trade. A good investor will read daily investment guide, tune to radio and TV that run programs on investment. Some people really on friend family or their broker. The need for us to be certain makes it some times that we have to wait for a couple of extra days to be sure of the particular stock price movement and just on a false breakout.

What I am saying above could lead to another problem or big mistake, if we wait too long and allow the price to collapse before our eyes. Waiting too long could increase your risk if the market tumbles down.

Investors who wait and wait for too long for a clearer signal usually enter the market just before the stock sells off. The investor may cry of picking the wrong stock but the truth is that the timing was wrong.

3. Spending Profits that has not been made

Highly profitable trades can be very exciting. An investor should not be carried away by the upward price movement which means profit. It would be a big mistake to forecast a continuous rise in price and go on spending spree in anticipation of a big profit. The real problem occurs as you get caught up in day dreaming and expectations

To avoid this mistake, it is advisable you create an exit point where you take profit as you enter the trade

4. The mistake of “hope, wish and pray”.

Whatever your opinion may be, the stock market does not give a damn. If you find your self in a situation of “hoping, wishing or praying” note that nothing in this world is going to change a bad trade to a good trade. The remedy to this situation is to sell off and reposition for profit in another stock.

5. Not sticking to your strategy

When a trader deviates from his strategy, it could be a source of concern. Trading with different rules every time could lead to lost of a system. Switching approaches because of few loses could make a trader most vulnerable. It is advisable to maintain a strategy to create a system that is predictable. No system is perfect but an investor can make money using a particular system by trading with it repeatedly over and over to exploit whatever opportunity therein.

6. Wrong timing to quitting a losing trade

Quitting a losing trade is the best option for an investor who realizes that he has made a bad move. Hope, Wish and Pray can not save a bad trade situation. However it is important to quit a losing trade timely.

7. Do not fall in love with a particular stock

Falling in love with a particular stock could make you get carried away. By this I mean

having too much confidence in a particular stock. A stock may rise to a highly profitable level, do not be too confident and expectant of further rise even when the price oscillates. Do not fall in love and expectant, sell and get out with profit.

To A Profitable Investment

Newton Oderhohwo is the CEO and senior investment and stock analyst of Stock Exchange Profits inc. member of investors intelligence group int’l and runs a periodic commentary on stock investments and making money in shares.

Tags: Avoid, Mistakes, Shares, Stock, trading

Trading and Investing 4U, in preparing this post, did not take into account the investment objectives, financial situation and particular needs of the investor. Before making any decision about the information provided, you must consider the appropriateness of the information having regard to your objectives, financial situation, and needs, and always consult your advisor. Securities and Derivatives have inherent risks and any comments appearing here are general advice only and can involve high risk investment. Trading and Investing 4U has made every effort to ensure the information is accurate, however its accuracy, reliability or completeness is not guaranteed.

Any advice in this post is General Advice only