Beginner Mistakes to Absolutely Avoid For Traders

Beginner Mistakes to Absolutely Avoid For Traders : Scams and misleading promises are unfortunately common in the world of trading. You can still rely on a few allies to help you avoid them; the primary ones are listed here.

Beginner mistakes to Absolutely avoid for Traders is :

Beginner Mistakes to Avoid : #1 Trading beyond your means

Trading should continue to be a hobby, thus you must take pleasure in it. It’s time to change direction if your operations are causing you undue stress and your losses are beginning to threaten your financial stability.

Reduce the size of your positions if necessary so that the emotional effects of your trading profits and losses are kept to a minimum.

Beginner Mistakes to Avoid : #2  Stay in position with leverage overnight

Your protection against gaps is not provided by a stop-loss order. You may suffer substantial cash losses as a result of these price spikes, which can cause prices to change abruptly during trading sessions or after a night or weekend when markets reopen.

Even worse, if you used leverage, they may also cause your capital to go into the red and incur debt for you. Knowing the dangers that come with trading is crucial if you want to enjoy trading for a long time.

Beginner Mistakes to Avoid : #3 Counterparty risk

When you make an investment in stocks or bonds, you take ownership of the underlying financial security. Consequently, you personally own a tiny firm or a little amount of debt. On the other hand, you are not the owner of an economic asset when you invest in a derivative product or a structured product; rather, you are a party to a contract.

On structured markets, the clearing house serves as the contract’s counterparty. This organization is competent to fulfill the contract’s obligations under any conditions. On over-the-counter marketplaces, however, another investor serves as the contract’s counterparty.

As a result, you incur the danger of the latter not fulfilling all of its obligations to pay you or doing so slowly. We refer to this danger as “counterparty risk” since it is just that.

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Beginner Mistakes to Avoid : #4 Market risk

The danger that is most visible is possibly market risk. The risk of losing some of the capital invested in a financial product is discussed, regardless of whether the loss in value is latent or realized (once the asset has actually been sold for a price less desirable than its original purchase price).

Remember that a financial product’s price could jolt down to zero or endure a rapid, sharp decline of several tens of percent!

Beginner Mistakes to Absolutely Avoid For Traders
Beginner Mistakes to Absolutely Avoid For Traders

Beginner Mistakes to Avoid : #5 Legal risk

Buying or selling financial products based on non-public information likely to have an impact on market prices is insider trading punishable by heavy fines or even prison sentences.

Furthermore, any attempt to manipulate the market, whether through a technical mechanism or by disseminating false information, is also a reprehensible practice.

Professionals are aware of these risks, but individuals can quickly fall into illegality due to lack of knowledge of the law. Never engage in a practice that would appear to you to be controversial with regard to regulations or unfair to other investors!

Beginner Mistakes to Avoid : #6 Currency risk

Currency risk arises when you invest in a financial product denominated in a foreign currency whose exchange rate against the euro fluctuates.

For example: If you invest in the stock of the Toyota company, listed in Japan, and whose price is denominated in Japanese yen, you will be faced with exchange risk (since the euro-yen exchange rate is constantly changing) .

To know the performance in euros of your investment made in Japanese yen in Toyota shares, you will then have to consider variations in the exchange rate between the euro and the Japanese yen.

These fluctuations may either increase your performance (if the value of the yen has increased against the euro between the purchase and resale of your shares), or penalize your performance (if the value of the yen has fallen against the euro at price of your investment).

Beginner Mistakes to Avoid : #7 The risk of scam

The purchase and sale of financial products generate significant flows of money which, inevitably, attract scammers of all kinds: sellers with misleading marketing promises, proven scammers whose objective is clearly to extort money from you, etc. In general, be wary of offers that are too tempting!

Once again, there is no “miracle strategy” or “highly profitable guaranteed investment”. Any return above the risk-free rate involves risk, and if the return offered is high, that means the level of risk is high too.

Finally, always check the identity and reputation of the service or person you are about to trust, and do not hesitate to contact its customers directly to find out their point of view before taking action. .

Beginner Mistakes to Avoid : #8 Execution risk

When you send stock market orders to a financial intermediary, these buy or sell requests may be executed incorrectly or not executed at all.

These technical difficulties arise in particular when markets are particularly volatile and illiquid (when price movements are violent and few investors operate in the market).

Indeed, in order for your stock market order to be executed on the market, it must find an available counterparty. Therefore, if no counterparty is available at the price you wish to enter, your order will simply not be executed. And if a counterparty is available, but for a quantity lower than that mentioned in your stock market order, your order will only be partially executed…

So, when you use a market order or threshold order, you control the timing of your order triggering, but you do not control the price at which it must be executed. You therefore run the risk that your stock market order will be executed at a price lower than your expectations!

Beginner Mistakes to Avoid : #9 Don’t cut your losses

No Trader can have 100% success on the financial markets. Sooner or later (and usually sooner rather than later), you will face your first losses.

So be careful not to get carried away by the market. As unlikely as it may seem to you, the trend could continue for a long time and your losses could deepen much further.

Using a stop-loss to automatically cut your losses in the event of an adverse movement is therefore strongly recommended in order to protect your capital. “The market can stay irrational longer than you can stay solvent. »

Beginner Mistakes to Avoid : #10 The addictive risk

The final risk discussed in this module is more “taboo” because it is the potential of developing a trading addiction.

Trading, which produces monetary profits and losses, can lead to the phenomena of addiction, especially in the context of speculative activities, when wins and losses result in recurrent high-dose releases of dopamine and adrenaline.

Many traders have their eyes fixed to their screens all day long, watching their charts and trading stocks like they were in a casino.

They wager ever-increasing amounts in search of thrills, and eventually they inexorably wind up incurring large financial losses, putting their financial and social stability in peril. Make sure you always maintain control of the situation.

Disclaimer : The information provided at this website is for educational purposes only and should not be considered financial, legal, or investment advice. Audience should always consult with a financial advisor before making any financial decisions. The owner of this site will not be held responsible for any financial loss or damage that may result from the use of information provided at this website : bestwaytomakemoney.online.

Only knowledgeable consumers who understand the operation of complicated financial products and bear high risks (or even losses bigger than deposits) should engage in trading. The information on this website is not intended to be investment advice or to promote the trading of financial products.

 

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