The,most,common,stock,trading, finance, share, loan The most common stock trading pitfalls
Date:2021-01-11 The,most,common,stock,trading, finance
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First you need to be able to recognise
them and you will then be better placed to avoid them.
Runaway Trend Equals
Runaway Train
You should always avoid trading a runaway trend. If you have
missed your planned entry price for a stock you are following, it is
often better to wait rather than try to enter a position as the trend
accelerates.
More than likely the stock will be pulled back and again test the
trend breakout point allowing you to enter at a price closer to your
original desired entry point.
If you are already holding a position in the stock just revise
your exit point upwards and adjust your stops accordingly. Consider
reducing your position to leave as much profit in the trade as
possible.
Averaging Down
Averaging down when stock trading is usually a bad idea despite
what many investment advisors may tell you.
Its supposedly a good way to reduce your cost base but we feel
its a way of throwing good money after bad. A good stock trader
sells losers not buys into them!
However, averaging up or pyramiding is a good practice to
adopt. Buying more of a stock that is trending up can never be a bad
idea. Just be aware not to over expose yourself to one particular
stock in your portfolio.
Ignore Your Stops At Your
Peril!
Ignoring your stops when stock trading is probably the easiest and
most common stock trading mistake.
Its so easy to talk yourself out of obeying your stops both on
the upside and downside.
When a stock is rising its very tempting to raise your stops
too close to the price and any pullback will see your stopped out.
Conversely, when a stop is falling, unless you stick to your stops
you are really entering the realm of wishful thinking that a stock
will rebound above the point you should have sold at.
Trust your technical analysis and stick rigidly to your stop loss
planning.
You will lose at stock trading, that is the nature of the
business. How you manage those losing trades will ultimately be the
key to your overall success. Cut your losses quickly and let the
winners ride as long as possible.
Dont Over Diversify
Diversify when stock trading as everyone will tell you. However it
is just as big a stock trading mistake to diversify too much as too
little.
There are only so many hours in the day and you are just one
person, so there will be a limit on how many positions you can manage
and monitor.
That limit will vary from person to person so you need to find a
level you are comfortable with.
It is far better to manage a small number of positions
successfully than to have your fingers in too many pies to the extent
that you cannot possibly keep track.
Start with four of five positions and then work your way up rather
than the other way around.Conclusion
To steer a path clear of these stock
trading pitfalls you need a stock trading plan, a plan you will stick
to. Avoid jumping aboard the runaway train, don't stretch your
resources too far and stick rigidly to your trading stops.
The,most,common,stock,trading,
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