What are the mistakes that new traders do while trading?

THE MISTAKES THAT NEW TRADERS DO WHILE TRADING

The common mistakes every newcomer does. is without any knowledge t
hey enter in the market. but apart from that, they have to take knowledge which they can get from reading books, learn technical and fundamentals of the market know the basic formation and the working processor of the market, how the stocks move and on which parameters.

The basic and most common factors they should learn and remember for the life is.

1. Technical and fundamental knowledge of the market.

when a newcomer enters the market, he has to understand the basics of the financial market, like how the market runs and what’s is the reason behind it. for that, the person must learn the techniques and fundamentals of the markets. which can learn through reading books, watch financial videos, follow some active market traders which are in the market for the long term so that you can take experience from all that things. this will help you in the long run in the financial markets. don’t look for any holy grail fin overnight.

2. Learn making own system

when anybody says make own system, that simple mean is to make a system that you can believe, a system means everything can be predefined if anything is going ups and down so you need to do a simple modification in that so everything can be managed.

A system contains Risk management, Risk reward ratio, position-sizing, And your experience from the market you have taken. Trust your system and backrest it for 5-10 years so that your system can perform well in every market scenario don’t be trade emotionally, let your system handle it. when any event comes you can manage it.

3. Risk management

The word ‘Risk management’ describes itself. it simply says take that much risk which you can manage, in another word it means that take the only risk of the amount which you can forget as investment or you can lose it without any panic in your mind. if this amount you lose even after that you can to bed peacefully and sleep without any headache.

According to the experience of the most active and successful traders, the maximum risk is the risk you always decided before your trades in every condition it will be the same. the maximum risk can be 3-5% of your actual investment or hard-cash not on your limits.

we will understand it with an example of position Sizing, suppose one has an investment of Rs. 1,00,000/- so the maximum risk for the day is 3000-5000 in . in this case we can purchase 1000 shares with the stop loss of 5 Rs. , or we can take 5000 shares with the stop loss with 1 Rs.

the risk ratio will be the same and it has to be managed for successful trades.

4.Risk Reward

Risk Reward means for how much of earning how much risk you are taking. For example for earning of 100 Rs. how much risk you are taking

for better results and the risk-reward ratio should be 1:2 or 1:3 that means with the risk of 50 Rs you are going to earn 100 Rs or 150 Rs. according to the market conditions, you can increase it to more but the minimum should be 1:2 or 1:3, with this reward ratio if your 40% trades are going fine, then also you will be profitable.

Always learn to book small losses, you can use that money for the next trades don’t stick to the trades if your system warns you about to exit. and never do Overtrades

5. Conviction

A conviction will only come when you trust your system some time happens that we have fully convinced about the trades that it will be profitable but due to fear of loss you do not enter in that profitable trades. this can be the act of your previous unprofessional trades. so just trust your system which you have made with your experience.

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