ByTrading stocks and shares is one way of making a good living, yet trading shares is not plain sailing; you are basically trying to predict the future and there are so many variables that might affect the share value of a company. In this article, we point out a few of the common mistakes a novice trader should avoid, to help you prepare for a successful career as a private share trader.
- Trading in markets with insufficient knowledge – Those who trade shares in Australia typically move in markets that they understand; if you have zero knowledge of the finance industry, you wouldn’t invest in major players, unless, of course, you have some sound knowledge. Simply put, it is hard enough to make a profit buying and selling shares in a market you understand – moving into an industry you know nothing about is likely to lead to disaster.
- Chasing losses – Losses are part and parcel of trading and the goal is to minimise them whenever possible. If you have a loss, this should not affect your future trading plans; rather you should put the loss at the back of your mind and try to analyse things to discover why the trade was not profitable.
- Trading with no plan – Every trader should have a plan, which begins by identifying your goals; whether short or long term and without a firm plan, you are less likely to enjoy success. Your broker should have all the learning resources you need to grasp a sound understanding of trading shares; the great thing about online learning is you can go at your own pace.
- Trading before you are ready – Some traders are impatient and want to trade ASAP; we don’t recommend this, you are better off opening a demo account when you can trade using imaginary money, which gives you essential hands-on experience and when you think you are ready to trade for real, open a live trading account.
- Failing to use stop-loss orders – A stop-loss order is a powerful tool that is designed to prevent a trader getting into hot water. There are both hard and soft stop-loss features and we advise novice traders to use the hard soft-loss options; soft loss is suitable for experienced traders. An essential tool for risk management, it is important to familiarise yourself with stop-loss features.
If you join forces with a leading Australian share trading broker, you can enjoy the many benefits such as free learning resources, which is essential for a novice trader. It is a comforting thought to know you have teamed up with a successful share trading broker and they want you to succeed as much as you do. There are more than 2,000 registered companies registered with ASX and forging an alliance with a top-rated brokerage makes total sense.
