Trading Mistakes

Common Investing Mistakes & How to Handle Them

Updated: August 23, 2018

Buying the wrong stock

Don't sell it just yet. Quickly make an assessment (you might just make money!) to determine if the trade is going for you or against you. First, determine the spread and possible exit points. Check the Prints and see if you are getting appropriate signals. Regardless, if it is going up, let it run, offer into the momentum and take a quick profit. Consider it a gift. If it is not going your way, exit quickly. Do not waste time rationalizing or justifying the trade.

Panicking when the computer system goes down

No system is immune to occasional bog-downs. Whether the source of the problem is your internet connection, your trading software, or the brokerage, avoid trading until it is fixed. If you had an open position, do not panic. You will not only cloud your judgment, but you may also make a fool of yourself. Know what open positions you have and write them on a piece of paper. If you wish to exit that position, write down a specific buy or sell order (stock symbol, market or limit order, buy or sell, price and share size) and hand it to the licensed broker in the office if you are trading in an office, or phone in the order execution.

Waiting too long to sell

Believe it or not, many people have trouble closing out a profitable trade. It is a greed problem. If you are showing a large profit, go ahead, take the money! If you choose to wait, you may see the profit disappear. This is a common trading mistake for many investors. Don't end up saying, “I should have sold when I was up."

Holding on to a failing trade

There is only one thing to do – get out! You can't win 'em all. As a reminder, a big and costly loser usually starts off as a small one. Generally, if you are out more than one point, you are in real trouble.

Short-selling a stock without proper caution

If someone tells you to short a stock, don't act on it on just their say so! Instead, observe the stock and see what you can learn.

Trading in a situation where you cannot concentrate

Trading in a distracting situation can be dangerous. It is better to pass up the trade than to make a mistake and end up losing a substantial amount of money.

You're having a bad trading streak

If you've had more than 3 losers in a row, it's time to reevaluate. Step back, relax and see what you did wrong. Avoid trading to “make back the money". Always remember to take it one trade at a time. That last loser shouldn't influence your next position.

Over Trading

If you have 60 tickets in the middle of the day, you are over trading. Practice your decision-making skills by making quality trading decisions. How many trades you can fire off is not important, choosing profitable trades is. Even after becoming an ace at execution skills, you must continue to practice and learn because as previously stated, the financial world is always changing. Keep ahead of the game and your trading will be profitable!

We hope you've enjoyed this educational section provided by Online Trading Academy. We've touched on only a few of the key points needed to become a successful trader. For more information, read our article on Investing for Beginners to discover basic rules for smart investors to follow. Online Trading Academy specializes in a complete trader education from the ground up. Online Trading Academy's on-location trading courses also feature live trading in the classroom, so that the initial fear factor is handled! Complete your trading education today with us!

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