Trading is like any other business; once you understand it, much fear and anticipation of market fluctuations will disappear. Trading is a lot more than making the right trade and booking profit. Risk management is the primary thing you should consider before making a trade. Trading is risky and challenging, but the greater the risk, the greater the profit. So calculated risk is worth taking for long-term benefits. Traders invest in stocks, ETFs and other securities for long-term holdings and buy and sell futures and options for the short term.
The nature of mistakes is different, so different techniques are required to avoid these mistakes. Some mistakes are unavoidable, so you must have some plan to minimize the losses. You can generate lots of profit and minimize risk through ideal future day trading strategies.
Here are 5 common mistakes and strategies to avoid those mistakes:
1)Not using Stop-Loss Orders
Not using Stop-Loss orders is a sign of unprepared trading. It is crucial to use stop orders to limit losses due to adverse market or stock movement. The order will get executed once it has reached the pre-defined limit. Stop loss means to cover losses before they become sizeable. This is not entirely beneficial as sometimes long positions are implemented below the specified limits due to a sudden narrowing. If you believe the price trend might reverse, you can avoid this mistake by cancelling the order before the price reaches the trigger point.
2)Investing without Market Research
This is the most common mistake that beginners make. Some beginners make rash decisions based on their so-called “good luck”.They blindly invest in the stock which is performing on that particular day without knowing the history and records of the company. They forget the basic investment rule, which is subject to market risk. You must not invest based on your gut or some tip received; you must understand the market before making any position. The volatility of the market must be researched. It would help if you used future day trading strategies.
3)Not Diversifying the Risk
The goal of all investors is to earn high returns with the lowest possible risk. Therefore it is essential to diversify the investment to minimize the risk. If you have allocated your money to different assets, then the gain of one asset will cover the losses of the other. This process is called Risk Management. Systematic risk, unavoidable, can be reduced by hedging against unsystematic risk. You must figure out your risk tolerance capacity in day trading commodities. If you can bear low risk, buying blue chip stocks of established firms and treasury bonds is recommended. Never invest more than your risk-bearing capacity.
4)Trading in stocks that are illiquid
Due to a lack of research , beginners make the biggest mistake of trading in illiquid stocks. A trader's sell order will not get executed if there are no buyers available; the trader will not be able to make a profit even if the stock's target price is achieved. The liquidity of stocks is very vital in day trading commodities. Limited trading makes illiquid stocks undesirable. The technical analysis fails in such stocks.
5)Ignoring the Usage of Technical Analysis
If you are an intraday trader, then technical analysis is necessary. You can make a well-informed decision by analyzing the past performance of the company and its stock. This is the first and foremost step performed before trading by beginners and experienced both. The traders look at the volume charts, prices and several other indicators to make a beneficial trade. These indicators help to know the recent trend and the timing for which it will last. There is no surety in the market as it can fluctuate in seconds, but technical analysis helps you to make the safest possible trade. You must choose the right stock after analyzing all technical parameters.
Conclusion
Mistakes are part of the learning process in day trading commodities. Commodities University offers ideal trading courses to learn future day trading strategies. Our learning will help you make trade plans based on your analysis. With Commodities University, you will be able to master the basics of the stock market, future and option trading etc.
Source URL: https://www.commoditiesuniversity.com/
