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Market Oracle FREE Newsletter


Classic Pitfalls for Inexperienced Traders

InvestorEducation / Learn to Trade May 14, 2019 - 09:46 AM GMT

By: Submissions


Investing in financial markets has always been a popular way for people to make their money work better for them. When you consider that the average annual return on an investment portfolio is around 5% whereas the annual interest that you would get from a bank savings account is much lower, it is clear to see why.

Most people will still start their investment journey by trading on the stock market. From the $5tn London Stock Exchange to the massive $30tn New York Stock Exchange, it is obvious that there is money to made in these fast-moving environments. When you also start to look into other investment types, such as commodities, the picture becomes even more exciting for investors.

Before you rush in though, you need to stop and take a breath. As an inexperienced trader, it is vital to do some research first and find out which common pitfalls you need to avoid. This will help you to enjoy a long career trading on the world’s markets and make money, rather than losing it. Here are some of the worst mistakes that every new trader shousidestep.

Not getting to grips with the basics

It can be easy to have a brief look at something like the stock market and think that you know how it works. After all, the principle behind it all is quite simple – if the stocks you buy go up in value, then you make money. However, in reality, it takes a lot more knowledge of how the markets work and how to find stocks or other investments to buy in order to succeed.

This is why it is so key to do your research and get educated on how the market or asset you will trade works. Learn about the common terminology you will come across, find out how to read charts, think about how you will find investment opportunities, and really dig deep into what trading involves. This will mean that you are fully prepared when you begin to trade for real with your own money.

Not taking enough time choosing a broker

To trade on something like the stock market, you will need to use an online broker. These online firms are essentially the middle-man between you and the market. They take your orders and place them on the market for you while also giving you somewhere to easily keep track of your portfolio. They will also hold your personal and banking details, which is why taking your time to pick a reputable one is vital! Do not simply choose the first one you find online or the one that has the flashiest website. Look at online reviews, talk to other traders on forums, and have a thorough check on their history before you sign up. 7

Failing to make full use of any broker support

Many reputable and trustworthy brokers, including TD Direct Investing, will have fabulous tools for the inexperienced trader to use. Make full use of this kind of support to help you understand the market better and grow as a trader. In the end, it will help you to succeed in the long term and gain the extra experience you need. Whether it is videos, tutorials, articles or demo accounts, make sure to use them all to help out.

Not drawing up a trading plan to stick to

Planning is key to succeeding in anything in life, and trading is no different. As a new trader, you must write out a trading plan and then follow it each time you trade. The plan should include things such as which charts you will look at, what type of stocks you are interested in, what conditions you will buy in, and your exit strategy in terms of trades. It should also cover how much you will risk on any one trade and how you will manage your trading account. If you are unsure how to do this, then head online as there are lots of great trading plan articles that explain it in more detail.

Be one of the traders who make it

Although there are many successful traders who invest their money this way, there are also some who fall by the wayside. The real key task you have when starting out is making sure that you are one of those who make it through to be an experienced trader. This should ideally be your first concern when starting out rather than actually making lots of money. In time, when you have the experience, you can begin to focus on maximising your returns and your entire portfolio.

By Lee Ralph

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© 2019 Copyright Lee Ralph - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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