Practice makes perfect is a phrase you’ll hear over and over again when you start trading for the first time and it’s something that applies no matter how skilled you become. Making mistakes is how traders develop their expertise and is a vital part of the learning process. That said, you can still make yourself aware of some of the common pitfalls which will help you to minimize any risks. Here are 8 common mistakes that you should avoid when online trading with GigaFX.
Failing to plan your GigaFX strategy
Not planning your trading strategy, or having one and failing to stick to it, is one of the most common mistakes that online traders can make. Many of the most experienced traders will tell you that a well thought out and well defined plan is vital to beating the market. This means knowing exactly how much they are prepared to lose, how much they are willing to invest as well as their entry and exit points. The closer you stick to your initial plan, the less likely you are to make impulsive decisions which will in turn help you minimize any potential risk. If you find yourself prone to making rash decisions, try investing in typically less volatile stocks like blue chip companies as opposed to start-ups.
Trading without a timeframe
What exactly are you looking to accumulate money for? How long do you have to make enough money to reach your goals? These are the kind of questions you should be answering while you’re working out your trading strategy. Depending on what your goal is, be it buying a car or saving up for your retirement, it’s important to make investment decisions based on the time frame you’re expecting to meet.
Being slow off the mark
While making impulsive decisions is a major mistake that countless traders fall victim to, the same can be said for not reacting fast enough. For many traders, their success has been defined by taking a small loss and moving on. Repeated inaction if trades go against you can result in mounting losses. Bearing this in mind, many trading plans also use stop-loss orders. Capping losses before they become severe helps traders to minimize risk.
Failing to research
Knowledge is key to a successful trader as the more research they have done into a prospective investment the better informed their decision will be. Failing to complete enough research into a company before the initial trade means you are going into an investment blind and lacking vital information about the firm and its business plan. Good investments are often made thanks to good research and resisting the temptation to act on impulse.
Buying into the next big thing
There will always be rumors flying around that a new stock is set to be bought out and has the potential to earn you a hefty sum, but that doesn’t mean you should jump straight into investing in it. Tips that have no real foundation are common and can be little more than speculation. This is once again why thoroughly researching a company is so important. Take a moment to get all the facts (or as many as you can) before placing an order. What’s more, don’t be tempted to follow the crowd. Getting swept up in the hysteria surrounding a new stock is a mistake often made by new traders.
Another mistake that’s common among beginner traders is chopping and changing between too many markets. Finding your feet is vital so start small and invest in one or two stocks to gain experience. While it may be tempting to invest across the markets, be it stocks, currencies or commodities, it’s often too distracting for newcomers. This lack of focus can hinder their progress when it comes to gaining vital experience
Overestimating Your Abilities
Even if your very first trade goes your way, this doesn’t mean they all will. While beating the market from the offset can give you a well-needed confidence boost, it’s important not to get ahead of yourself. Overestimating your abilities and becoming complacent only leaves novices exposed to making mistakes.
Underestimating Your Abilities
From one extreme to another, if you’re too tentative when it comes to investing and lacking in the confidence to make decisions then you’re likely to struggle. You don’t need to be a stock market expert to be a successful trader but you do need drive and a desire to practice and improve. Anyone can participate in the financial markets as long as they equip themselves with the basic knowledge and training first.