Did you know there are mistakes you can and can’t control? When investing or trading, there are certain mistakes you can make that may lead to significant losses. In indices trading, beginners can make honest mistakes, especially if they think they know what they’re doing.
But first, an index is a basket of stocks that acts as the measurement of the entire economy by just placing a single position. It seems easy, right? However, indices trading is a lot more complicated than that.
Whether you have traded before or not, there are specific things you need to know about indices trading before you invest.
So if you don’t want to make mistakes, below are the things you should avoid before trading indices!
1. Not planning before trading
Whether it’s indices trading or other investment opportunities, planning should be your top priority. Of course, nothing’s wrong with trying, but you should still have at least short-term goals.
Let’s say you started trading on the right foot. Although things are getting interesting, it’s not guaranteed that you’re always going to win. So before losing happens, you should practise a safer way to trade.
The ideal way to trade is to create a solid plan that will give you other options when things didn’t go the way you want. Meanwhile, some traders want immediate profit, so they tend to go all in even if they just started.
2. Not having enough knowledge
Since indices trading allows a trader to gain exposure by just opening a single position, it entices them to trade without considering the volume. For instance, when traders see they can afford a stock index, they tend to trade as many as possible.
Unfortunately, it’s one of the common mistakes beginners make. They thought the more entries they trade, the more chances of winning. However, it’s not a win if not all your positions are positive.
So before diving into the world of indices trading or other trading opportunities, make sure to invest in the knowledge part. Once you’re educated enough to trade indices and other assets, you can try creating demo accounts and practise.
Knowledge and experience go hand in hand, especially in trading. Nowadays, there are many online training and workshops about different levels of traders. And to help you prepare for the future, it’s best to register even for those free workshops to see how things work.
3. Not trading for the actual goal
So you tried trading indices for the first time. Unfortunately, even if you’ve practiced and studied, there are times when you’ll fail. But once you fail, the best thing to do is to realign your goals. It’s not the time to get revenge and trade without concrete plans.
In this case, do you think you can trade with a clear mind? Before going back to the market again, compose yourself, and be ready with another way to gain everything you lost.
The same goes when you’re too stressed to reach your goal. Sure, it’s normal to feel a bit of anxiety when trading for a living. However, it’s better if you have a clear mind to think things through before doing anything.
4. Not taking risks into consideration
Indices trading, and trading in general, comes with different risks. One of the most common risks is when looking for a broker or trading platform. Of course, even if you’re knowledgeable enough to trade, being scammed has nothing to do with it.
Other strategies and methods you use may also become risks in the long run. Sometimes, even if you carefully analyse the pattern of the market, the factors affecting the market movement can be unpredictable. Some of these factors are company news, commodity prices, and economic news.
However, some traders choose to get into the market and hope for the best, even if their plan is not feasible yet.
5. Not trading with confidence
If you’re not confident enough to trade, there’s no point in doing it now. Usually, when this happens, you have personal issues and biases concerning the way you trade.
For instance, if you know the company owner or you worked there for some time, there’s this personal bias toward their shares. With that, you feel more comfortable trading their shares because you know what the company stands for.
Unfortunately, if that didn’t work out, your confidence level will drop, and your trading style might end up being a mess. It’s one of the reasons why trading through research is the ideal way to go. You don’t know anyone in these companies, and you’ll base everything you know on what you’ve gathered.
So before investing in stock financially, make sure you don’t have any emotional baggage to join with your training journey.
It’s alright to make mistakes sometimes, especially when you’re a beginner. But what if you have a way to skip all these common mistakes? Let us know if you have more tips for trading beginners by leaving a comment below!
ABOUT THE AUTHOR:
Aliana Baraquio is a web content writer at FP MARKETS, a global Financial Technology services Foreign Exchange (Forex) and Contracts for Differences (CFD) broker established in 2005. She also loves reading about interior design and home makeovers.