More and more people are trying their hand at trading and investing, but not realising the potential risks. A side hustle culture has encouraged Google searches for the term ‘how to invest’ to increase 54% in the UK this year vs last year, and ‘trading for beginners’ also jumped 13%. However, many are finding their money is disappearing rapidly as they fall victim to common mistakes.
Trading expert Louis Schoeman, Managing Director of Forex Suggest, shares three common mistakes beginners should avoid while trading, and how to be successful when trading and investing in the stock market.
3 common trading mistakes you should avoid to minimise losses
- Size will kill your trading account – It’s very easy to let greed take over once you’re on a good run of trades, and as much as profits are the name of the game, consistency is king when it comes to having sustained profitability. Planning out your risk management will not only give you sustainability, but it will make you more patient when entering a drawdown to keep your emotions under control.
- Not having a strategy – As much as traders focus on entering a trade, the important part when it comes to trading is what you do when the market turns against you, or aggressively moves in your favour. Having a plan in place to not only enter your trades but exit the trades will significantly increase your profits and limit your losses.
- Not sticking to your system – It’s essential to have a rules-based system on which you make your decisions. This will help you make error-free trades with the highest probability of success and deter you from making irrational decisions that you haven’t thoroughly thought through.
How to be successful trading and investing in the stock market:
- Keep a close eye on the market – You need to know what’s going on and what the macros are doing. With low-interest rates, the Global Monetary Policy is set for hawkish views as the global pandemic recovery continues. Vaccination rates are increasing and Covid-19 rates are generally on the decline so markets are poised to start hiking interest rates and cutting their stimulus packages which will be one of the driving forces for the next 12 months.
- Looking at a combination of technical and fundamental views – This will always benefit your trading in the long term as companies that have consistent earnings and revenue growth show signs of a healthy heartbeat. With this comprehensive approach you can determine when is the right entry time, and have the patience to let the market take its course.
- Diversifying your portfolio – If you have your hand in various sectors you’ll bring down the risk of unexpected news events adversely affecting your overall portfolio returns. Having stocks exposed to the Financial, BioTech,Technology and Hospitality sectors will limit drawdowns and bring down the correlation of your exposure.
Here is a detailed post on Forex Suggest about what to invest in and how to invest that may also be a useful resource: https://forexsuggest.com/what-to-invest-in/