Share market is that place where you are all the time pounded by uncertainties. On one occasion you can be a top gainer while on the other, you may lose all your money only to be dismayed. You might be familiar with some professional and experienced traders who regularly employ share trading tips to enhance their profitability, but the fact is they are equally aware of improbability and hence, take all precautions to avoid some common mistakes.
Regardless of your experience or level proficiency in trading, you got to play safe; fending off usual mistakes is the best possible option you have. So let’s discuss the top three common yet fatal mistakes traders commit and know how to stay secure:
Mistake No.1: Remaining Glued to Small-Cap Companies
Believe it or not, but there are a lot of new and experienced share traders who never go past their belief in small-cap companies. Shockingly enough, they put all their money in such securities without mulling over the percentage gain they would earn. In the process, they incorporate adequate research and read multiple share trading tips to safeguard their money, not realizing that their profits are going to be as tiny as the size of these securities.
Another foremost reality that we must talk about is – though small-cap companies are mostly recommended as the “hot bets” of the day, yet the majority of them never rise above average. If you are one such believer, it was the time you changed to a better strategy and started investing in large-cap companies. You can always blend your portfolio with some small-cap investments too but not entirely if you are eying big profits in the share market.
Mistake No.2: Trading Without Applying Stop Loss
In spite of so much of valuable insight shared online and the special mention by financial advisories in their stock trading tips, we can see thousands of people who trade without applying a stop loss. It might be a separate topic to discuss whether to call this their illiteracy, overconfidence or rigidity; but the fact is they don’t care.
Believing that you are investing your hard earned money in shares, it needs to be recurrently stressed that you must apply a stop loss to all your trades. Explicitly, this is a great way to tone down the intensity of losses, in the event stock prices decline. You are a smart trader if you earn profits under risks and volatile conditions, but you are smarter if you at the same time safeguard your money by applying stop loss.
Mistake No.3 – Maintaining An Imbalanced Portfolio
There can be numerous reasons to call your Share investment portfolio as imbalanced. Some examples of this can be seen when you have invested all the funds in one specific industry, or worse, just a couple companies. It is still imbalanced if you are focusing only on small-cap companies or only on large-cap ones. If it is so, you are quite exposed to loss and you must take steps to balance, preferably with expert help.
If you go on committing theses silly mistakes for long, you will never find share market a profitable avenue. Quicker you stop committing these errors, the better!