The biggest myths and mistakes of stock market investors.

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Beginner stock market investors at the beginning make very characteristic, and at the same time easy to eliminate mistakes. Because of these mistakes, some investors will abandon trading without being aware of the source of their failures. Looking objectively, a trader on the stock market, by eliminating several of the most important problems, significantly increases the chances of stock market earnings. Take a look at the mistakes and mistakes that most market participants make on a daily basis.

Getting discouraged quickly about the strategy you have chosen.

A few losing trades are not yet a reason for a sudden change of system. On the stock market, even the best traders suffer losses, because they are completely inevitable. If the tests have shown that the strategy you choose can be profitable, then a string of losing trades can simply be included in it and all you have to do is wait out the worse period.

After that, your technique will earn on its own.

What does it look like for novice traders? They mainly count on a quick profit, completely flooding the demo account and moving to live trading. Alternatively, they check the strategy quickly and briefly. Unfortunately, thorough testing of the plan requires many months of trials on an exchange demo account.

Somehow it will be.

If you treat the market like a casino, the stock market game will very quickly turn into a debilitating gamble. Can you build a house without design and plans? Exactly the same situation is when you trade without preparing and constantly updating the log.

Sitting down to the session, think, do you know what the likely direction of the market is? Do you know the price history? What goals have been achieved? What else needs to be done?

Too much emphasis on effectiveness.

According to a typical stock trader, you should achieve the highest possible efficiency. Despite the apparent rightness, if you can't manage risk wisely and open positions with a positive loss/profit ratio, then your percentage of successful trades will mean absolutely nothing.

Most people suffer losses not because of low efficiency, but by closing profitable positions too quickly. At the same time, they keep those that generate losses, often paying extra for them.

Consider that there are good traders whose profit is brought by strategies that work in less than 60% of cases.

Too much faith in mechanical and algorithmic trading.

Hedge funds have algorithms that allow them to carry out a large number of transactions in a short time. Unfortunately, ordinary people cannot use them. Such algorithms are systems based on artificial intelligence and do not use technical indicators. The algorithms are very diverse, and the additions to the platforms do not match them even in the slightest.

If making money on the stock market is about pressing buttons when one moving average crosses the other, then everyone could easily become rich. Consider business. There is no single and proven way to build a business, and there is no one in commerce. Each market situation is original in its own way and requires time for proper analysis.

Looking for methods for laymans.

If you are studying in a field, you usually do it in stages from beginner level to advanced level. However, trading looks different and learning only basic stock exchange techniques will not allow you to break out. As you will soon see, basic stock market techniques will soon be debunked in the later stages of learning.

Do not confuse the concepts of solutions for beginners with easy solutions, because there are simply none. Simple strategies are usually useless. If you want to understand how the financial markets work, invest your time to learn about auction theory and Wykoff's methodology.

Ignoring the demo account.

Most people are familiar with solutions such as demo account and backtesting. There are even exchange platforms that allow you to combine these techniques using a simulator. Some traders ignore these opportunities. Which is a pity, because recreating the market will allow you to find its weaknesses. If you bypass this educational part of the process, then you will most likely suffer negative consequences.

Account flipping on small deposits.

Using an account flip,i.e. multiplying a small capital in a short time, is a popular and the worst mistake that a novice stock market investor can make. It all starts with the deposit of a small sum into the broker account. The process goes sometimes better, sometimes worse, and at some point the internal pressure for profit takes its toll.

Such an account dies suddenly a "financial death". A player losing his deposit wants to play out by deciding on another account flip. After all, this is not a lot of money.

After a few series, maybe he will finally come to his senses and understand that it would be wiser to put these small sums into a larger budget. Account flipping may have a chance of success, but only in the hands of people who have sufficient funds to trade.

Trading in too low a time frame.

If you trade in low time frames, such as 1 minute or 5 minutes, you are gambling. Stocks of listed companies, or Forex, are complex mechanisms. They are used by people who close their positions within a few months or years. Such a flow of orders is characterized by a different nature, so it cannot be taken into account without a broader context.

It doesn't matter if you already have some experience or are just starting to trade on the stock market, make a habit of using monthly, weekly, daily, four-hour, one-hour and minute charts.

Your stop orders are too tight.

Cutting losses too close to where the trades were made is worse than not having a stop loss set. Ignoring the beton a stop order usually has a very bad ending, it is a market mechanism where the price tends to return to the most popular areas, playing without collateral can be quite profitable. However, if you want your trading to become a big loss generator, then continue to set a narrow margin of error for your trades. In the end, you will only be discouraged from the stock market.

You have a demo account somewhere.

Nature has endowed us with the quality of impatience. Also, when starting their adventure with the stock market, many traders decide to go to the element and recognize that a demo account is a waste of valuable time. So they make the mistake of throwing themselves into the deep end. Time shows that it is not a very good idea.

You should test your strategy many, many times on historical data. Without conducting trials on the simulator, it is better not to open a live account.

Wrong profit-loss ratio.

Some may cling to this, but cryptocurrencies or currency pairs are not suitable for long-term investments. Despite the current price of Bitcoin, this approach is surprising to say the least, but if you learn, then you will understand how complicated the mechanism is.

Long-term investing without knowledge of economics is a misunderstanding. Without such knowledge, it is better to focus on day trading with the use of instruments characterized by price volatility, This will guarantee you several opportunities to conclude a trade. Still, the most popular Forex pairs can move sluggishly, which can make you have to hold your position longer than you expect.

The role of psychology in trading on the stock market.

Those who teach other basics of the stock market believe that the right attitude and stock market discipline are the most important. They sideline trading methods, chart analysis, position management and other relevant matters. You can't ignore sticking to your own rules in different areas of your life, but putting psychological aspects as your main principle does more harm than good.

Stock market psychology is not as important as many think.

Now think about whether, by getting a mathematical activity and the right material, he will be able to solve complex problems thanks to his character and discipline. If someone tells you that their method works as long as they have the right character traits, they're just pushing you a putty in the world.

Just assume that something will work in the stock market regardless of whether the person using it will have a "hard" character or not.

Stock market helplessness.

A better understanding of how the market works and a few understandable and successful trades will contribute to your inner peace of mind, and before making more accurate trading decisions. You will know what you are doing and you will have a ready-made plan in case of failure. When something just fails, you will close the position at a loss and that's it. It would be irrational to keep it any further.

Let's take into account the behavior of a novice trader. It closes profitable trades quickly, and those that only bring losses, it maintains for a long time. The market is a huge roulette for him. He does not know where the price behavior comes from, he is afraid of a quick reversal of favorable situations, and he hopes to make up for the losses. Such a person should focus on controlling stress, and only then on running a business.

Constant action in tension leads to rapid mental burnout and resignation from playing on the stock market, because the workload will become disproportionate to the effects.

Discipline is not everything.

Trading psychology cannot be completely ignored. It is still a permanent part of the art of the stock exchange. If you start your adventure with the stock market, postpone building a mental attitude for a slightly later time. Focus on a working strategy. Think about how you can generate regular profit. Then focus on the stock market discipline needed to put the next plans into practice.

Impatience.

According to stereotypes, the stock market is a place of adrenaline seekers and strong impressions. Nothing could be further from the truth, investing in the stock market is, according to one of the industry authorities, as exciting as looking at the dyed paint. There is a lot of truth in this. This applies even to short-term investors.

The more impatient you are, the more you look for opportunities to make a deal. Unfortunately, you then make decisions of at least low quality. This will translate into losses and a significant capital squeeze.

Adisory to analyze transactions.

Just as you analyze a position before opening it, it's just as important that you do so after you open it. Completing a take profit order doesn't really convey anything, so you should save your stock market activities to focus on eliminating the most common mistakes.

You can use free analytical tools that will provide you with data on effectiveness, profit-loss ratio and determine the percentage of possibilities to clear your account.

You are a little cog in the stock market machine.

A stock market investor with little money is only a small fraction of the market forces, dominated by banks and funds. In addition, they use advanced algorithms and artificial intelligence. Consider that the stock market is a game where the retail investor most often loses.

Author

  • A lover of matters related to investing and finances. He runs a company dealing with financial optimization methods. Privately, a mother of four and a happy married woman. He enjoys playing the piano, music and singing. After hours he gives private lessons.

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