CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. See our full Risk Disclosure and Terms of Business for further details.

Search LOGIN

The most common mistakes made by investors in the stock markets

Here are 6 mistakes that are often repeated by investors in the stock marketsInevitably, investors trading on the stock markets make mistakes from time to time. It is only the stuff of tales that everyone makes money and goes around with a big smile on their faces. Especially investors who are wet behind the ear but still cannot stop trading assets will stumble, one way or another.

People often tend to learn from their negative experiences. Of course, when investing, one should accept that these negative experiences come at a price. At which point, Tolstoy's words must come to mind: learn from the mistakes of others. You do not live long enough to make all the mistakes yourself.

We can talk about dozens of things that one needs to do to be a successful investor. However, in today's article, we wanted to discuss the don'ts of trading. In the rest of the article, we will look into common mistakes made by investors that cause them to lose money. We hope that these will always remain "mistakes of others" and you will enjoy your profitable investments.

Here are 6 mistakes that are often repeated by investors in the stock markets:

1- Investing Without Knowledge


Before investing in a stock, investors must study all aspects of the asset and the company behind it. It would even be advisable to combine it with a thorough technical analysis. Investing in the shares of a company that operates in a business sector about which you have no idea is equal to gambling with your money. Investors who jump in with both feet at the slightest prospect of a profitable investment may not always be able to predict when they should cash out their stock, causing them to twist in the wind when markets face headwinds. Investing ignorantly is often a losing proposition and the first big mistake investors make when trading in the stock market.

Make informed investment decisions, not on a hunch or hearsay.


2- Having Unrealistic Expectations


The stock markets are full of people with dreams of getting rich the easy way. But, investors who act with unrealistic profit expectations often end up losing money. With the dissemination of social media tools, so much speculative information is now doing the rounds, with people not subject to any legal responsibility shepherding budding investors towards certain instruments.

Keep your expectations reasonable when investing in a financial asset on the stock market. Examine past performance and price movements of similar products. Set a target before trading, and when you reach your target, take in profits by closing out at least part of your position.


3- Investing Using Money You May Need in the Short Term


Investing, or seeing the results of your investment, is a process, and making an investment only to close out your position after a short while is counter-intuitive. Investing with borrowed money, taking out a loan to invest pushes people to behave irrationally. While price movements in the markets can become a test even for ordinary investors, the stakes can get even higher when you risk money that does not belong to you.

If you have invested money that you need in the short term, your risk threshold drops. To compensate for a small loss suffered, you may open a number of different positions in a panic and suffer larger losses.

Whether it is large or small, you should be able to live without the money you set aside for investment in the medium to long term. Invest with your savings. Let your goal be to protect your savings first and then grow them. The way to win is not to lose.

4- Being impatient

Investing in financial markets requires patience. If you have invested after good research, you may need some time to reap the benefits. Panic buying and selling often causes you to lose money. Staying cool is the most positive trait an investor can have while your capital grows before your eyes, or conversely, melts like sun-soaked ice cream.

The market cycle is very important to get a return on your investments. When there is a bull season and your investments are increasing day by day, you can increase your profits by being as patient as possible. Investors who do not analyse the situation well and act impatiently often jump the gun, and sell off their assets by agreeing to a lower return. As the market continues to rise, and they realise they made the wrong decision, they come under pressure to buy again over time. Buying at this point, the last stages of an uptrend, usually causes the investor to lose money.

If you get caught up in a headwind, you have several options. You can accept your loss and return to cash, reduce your costs by buying at a lower price after selling, or wait for another market cycle where you can profit by holding your investments for the long term.

Whatever you do, do not take up positions in a panic.


5- Acting with Your Emotions


When investing, you should not let your emotions get involved. Of course, this is not easy. Most investors develop positive feelings about the financial instruments they invest in or the companies whose shares they buy. Because they want to believe that they have made a successful investment and will make money. Naturally, they will be proud of this. While this is an extremely human condition, it often causes harm. It has been scientifically proven that people insist on the correctness of their own decisions. Because otherwise they would contradict themselves. The way to be a good investor is to put your emotions in a box when you are trading.

Do not harbour feelings for companies whose shares you buy or the financial assets in which you invest. Remember that your goal is only to make money


6- Putting All Your Eggs in One Basket


Investors can be extremely aggressive when they see an opportunity to make a profit. It may seem very logical to you to take a buy or sell action based on market news or a technical analysis signal about a financial asset. But investing your capital in a single asset is extremely risky. It can be very pleasant when you are winning but when things go wrong, you are basically stuck if you invest only in a single asset.

When investing, it is advisable to partition your capital to invest in different assets, keeping your investment portfolio diverse (making a basket) reduces your risk.

Every investor's expectation and risk threshold are different, so investors should create a basket that suits them.

You can try dividing up your capital when creating your portfolio. However, there is no formula that we can recommend to indicate how much money you should tie up in a particular stock or instrument.

  • Short-term investments
  • Long-term investments with high expectations,
  • Investments in low-risk financial products,
  • Investments in high-risk financial products,

In summary, there are paths you must follow to be a good investor, as well as paths that are full of pitfalls that you should never take. No trader can always be successful and win forever. However, it can be a good start to at least not make those mistakes often made by other traders.