Mistakes To Avoid When Trading In Equity

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  • 07 Feb 2023

To get into the profit trading bracket for equity trading and stay there, here are the 5 most common mistakes you should avoid:

  • Lack Of A Plan

The most common beginner mistakes. As a trader, you must first formulate a strategy. Before you invest your money, make sure you have a thorough knowledge of the company. Looking for a company with strong fundamentals is always suggested. In a nutshell- a well-framed plan will help to reap benefits in the volatile market.

  • Not Using Stop-loss Orders

Stop-loss orders protect you from drastic fluctuation. This order is triggered when your position reaches a pre-set price limit. Stop-loss orders make trading less risky by limiting the amount of capital risked on a trade. The beauty of a stop-loss order is that it costs nothing. You just have to pay a regular commission when the stop-loss price reaches the limit and the stock is sold. Moreover, the key advantage of using a stop-loss order is you don’t have to monitor your holdings daily.

  • Unstable Trading Patterns

Being a trader, you must adopt a proper trading pattern and adhere to it in every trade execution. Try different patterns and strategies, find out which method works the best. Initially, put multiple traders with different trading patterns. You will come to know which patterns are closer to accuracy.

  • Falling For Confirmation Bias

At times when traders suffer losses, they get carried away with news and research reports. They try to seek information that supports their belief. Also, such traders tend to ignore information that refuses their thoughts or thesis. This how confirmation bias works. It can overpower the right judgement and lead you to make poor investment decisions. So, make sure you don’t fall prey to this. Make a rational decision when it comes to equity trading or any investments.

  • Following The Herd

Not everything you hear is right. Some rumours are false and meant to be manipulated. So, never blindly believe information related to the markets. You should be able to filter out market noise by your own predictions and research and use such information to make a strategic move. In short, hold your own conviction over your equity tradings.

To conclude, trading in the equity market can be difficult if you don’t have the basic knowledge. So, make sure you do thorough research. This will help you in making the right choices in trading.

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