There are many ways in which one can commit mistakes when trading. Avoiding these decisions and keeping them in mind before starting to trade will help a lot when it comes to gaining profits. Check the top careless trading decisions you shouldn’t make when trading.
Getting in the Game Without Learning the Basics
What is high for a seller is usually low for a buyer. What you have to take away from this is that the same set of data may mean different things to different investors. A wide variety of conclusions can be drawn from the same set of data.
Jumping in the game without studying these things will only lead to shocks and losses when you start investing. Remember that the market is more complex than simple buying and selling.
Betting on Penny Stocks and Fads
For the unacquainted, investing in penny stocks may appear to be a good idea. Using a very cheap amount of money, you can buy a lot more shares of a penny stock than if you buy blue-chip stocks.
Most penny stock traders claim that they have the advantage of a higher upside if the penny stock goes up.
The problem is that these stocks are almost certainly always volatile. Penny stocks are generally poor companies that usually do not reach any semblance of profitability.
At the same time, penny stocks are always at risk of manipulation and illiquidity. You may also find it very difficult to get a solid information of the penny stock. And that makes them a bad choice for investors who are still learning the ropes.
Risking 100% in a Single Investment
Investing 100% of your money in one investment is a terrible idea. Any asset, even the most profitable one, experience drastic slumps and declines.
What you should instead do is follow one of the golden rules of investing: do not put all your eggs in one basket, or that basket will turn into a mass casket.
For newbie investors, it’s always better to buy a handful of stocks first. This way, you can afford to learn from market slumps and downturns but with lesser impact on your capital.
Using a lot of Leverage
Using margin and leverage means that you use borrowed money to buy more stocks than your funds can actually afford. Also, keep in mind that leverage magnifies both the potential gains and losses on an investment.
There are also other forms of leverage, including options, which can provide limited downside and can be flexible with the use of market orders.
Risking what Shouldn’t be Risked
This is perhaps one of the most terrible decisions you can make when trading. You should never risk what you can’t afford to lose.
Only invest the money that is specifically dedicated to trading, so that if ever you lose the trade or fail in investing, your personal wealth wouldn’t be terribly affected.