In recent times, there has been a sudden increase in the number of people investing in stock markets. There could be several reasons behind this – to make quick and substantial gains out of their investment. Since stock market trading is found to be very complex, only experts know the tips and tricks to ensure the best returns. Novices are prone to committing mistakes which ends up facing losses rather than winning big returns. So for better performance, you should use best trading platform in India and avoid mistakes that is listed below.
So, here we are presenting some of the common mistake that new stock investors tend to make while trading in equities.
1.Lack of proper plan
Investing your hard-earned money in the right tool needs high level of cognizance and intellect. Just like we don’t any food without checking its quality, it is a thumb rule to check the credentials of the company before investing.
The lack of a proper plan before investing is a common mistake that many do. According to the best stock broker in India, the first and foremost thing to do is to prepare a detailed plan in regard to investment. And the best way to take a stronghold in this aspect is to do a thorough research about the company you’re looking to invest in, best time to invest, the amount you should invest in, and others. This would hep you in getting the best returns.
2.Irregular Trading Pattern
Another commonly done mistake by new investors is to follow an irregular trading pattern. Generally, people choose from the top 10 stock brokers in India and start investing frequently in the beginning but over time they slow down and divert funds to other things.
According to stock market experts, it is always a great idea to invest in a timely and regular fashion so that you can analyze when and how much to invest. This can only be done by following a regular trading pattern. Over time, you will come to know several ways to improve the trading strategy.
3.Chasing the popular stocks
A determining factor in the stock investment is the level of return you get out of your investment is the timing of your investment. If you choose to invest in a stock after going through its performance earlier, you generally invest in a past price movement. This might be the best move, as the return depends on the stock’s performance in the future and not the past. In addition, past gains in terms of cost don’t guarantee steady future growth. This happens commonly that the stock price dips after a sharp rise.
4.Not diversifying your investment
A study has revealed that new investors lack the diversification of their portfolio. They generally choose one or two stock and put all their money in it. Though it seems an easy investment option, it is usually not recommended as the risk of losing your money is pretty high in this case. One proven way to avoid such situation is to diversify your portfolio by putting your money in stocks across different sectors. By diversifying your portfolio, you will not only lessen the risk of losing money in case of downturn but also make big gains.
5.Not using stop-orders smartly
A stop-loss order refers to an order that is placed with your broker/portfolio manager that guides them to buy or sell a stock when it attains a preset price. For instance, if you have purchased a share worth Rs 100 and place a stop-loss order for Rs 90, you ensure that the optimum loss will be Rs 10. The stop-loss order guarantees that your stocks are sold automatically if the share value dips to that mark. For fresh investors, not using stop-loss orders is a big mistake as it can knowingly lessen losses and risk. Newbie traders end up losing their capital mainly because they don’t follow stop-loss.
