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Novice Trading Errors That Can Cause Significant Losses


A majority of all concerned novice traders are inexperienced and full of vigor. This is one of the reasons behind committing possible mistakes. There are several instances where silly mistakes on the part of the traders have resulted in career-ending whoppers. There are different types of miscalculations and trading errors that can result in a substantial dip in your buoyancy, as well.

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Disorderliness In Position Sizing

The first and foremost trading error that a majority of all concerned novice traders tend to commit is indiscipline as far as position sizing remains in question. You need to understand that the maximum trading that can be performed is twice the amount that is available in the account. However, Futures and Forex make available greater leverage. There are situations where it is possible to trade fifty times on the available amount. Also, there are situations where the leverage is 200 times, as well. It is important to realize that, in case, of large leverage, continuous losses can drain the account.

Trading At Inappropriate Timings And Over Trading

One of the other common novice trading errors is the wrong timing. There is no point in believing that, as a new trader, you will not find it easy to trade prudently. However, the fact remains that it is always possible to develop a fair understanding of the apt timing as to when the trade dealings can be performed. There remains every possibility of suffering from a substantial amount of risk if the timing is not correct. It is always possible to consider over trading as a possible reason behind errors creeping up in the trading activities. Developing confidence after initial success can always be considered to be one of the reasons behind trading errors creeping up. There are instances where you will feel encouraged in taking as many as 5 long trades in a single day. You can certainly benefit ultimately by resorting to no more than a single trade for 25 pips. This is one of the reasons why; best binary options broker assumes importance.

System Hoping And Blind Following

It indeed seems to be a matter of grave concern that novice traders are not familiar with the aspect that there exists no single perfect system. It is only an experienced trader who realizes the truth that every single system boats of its own benefits and flaws. Also, there is no point in believing that the machine can perform all types of tasks. Novice traders fail to come to terms with the verity that analysis and detailed thought must be performed by the trader.

Over Trust And Revenge Trading

Opting for the wrong brokers is also one of the reasons behind committing trading errors. There is no point in blindly believing seasoned traders. Making a concerted effort to earn more to make up for the previous losses can cause a substantial amount of losses, as well. In other words, engaging in trading activities ruled by emotions can never position you on the winning side. You can always search the internet to learn about the best trading alternatives.

Why We Need Protection From Securities Brokers

There are plenty of people who slave and work themselves like a locomotive to accrue savings that they can invest in stocks. They think that it’s their passport to wealth. So, with high hopes of a sizeable return of investments, they call a broker. In theory, a securities broker “is the mediating party between a buyer and a seller in a business transaction on the stock exchange. He or she brings together the investment opportunities and the investor.” Pay important attention to this next segment, “securities brokers provide the client with pertinent facts that would help them on their investment decisions.” But in reality, over the past few years, investors have lost a total of 5.5 trillion cumulatively. With this kind of figure, most investors must start to question the standards upon which brokers execute their profession.

The truth is that many have been swindled in the world of stocks. Most people assume that because they’re entrusting a large amount of money their best interests will be taken to heart. Brokers are around money all the time, and what that does to people is make them greedy. Brokers work on a commission-per-sale basis. What happens is, they prioritize a bigger commission for large investments that may not actually work for the investor in the long term. This practice in the brokerage industry has given rise to the need for investors’ protection from bad business. Hence, we give you our 3 tips to protect yourself from greedy brokers:

1. Word of the day: fiduciary
Whenever you avail of a brokerage firm’s assistance, ask them what standard they operate under. There are two standards you should be familiar with. Most brokers work under the “suitability” standard which means that they sell investments that they think are “suitable” for the investor. Suitable does not necessarily mean the best. Sometimes it means suitable for the client, best commission for the broker. On the other hand, a fiduciary standard requires, by law, that the financial advisors put the interests of the clients above their own. To know whether the brokerage firm operates under the fiduciary standard, ask them if they have a “Series 65” license.

2. Advisor or broker
There has been an on-going debate on who can best look after your money – a broker or adviser? In conjunction with the tip prior, we advised that you should look for professionals governed by the “fiduciary standard.” It is less risky to hire the services of an advisor than a broker because all registered advisors are bound by the fiduciary standard. To elaborate further, the fiduciary standard according to NYtimes.com is “a fiduciary responsibility is an ethical and legal requirement that the investor’s best interest comes first, not the adviser’s own financial gain.” Since it is a legal agreement, advisors who have failed to serve the best interests of their clients are punishable by law.

3. Successful investments require your due diligence
Whether or not you choose an advisor or a broker, what really helps is research. Dishonest professionals prey upon unsuspecting victims – those who have no working knowledge of what they’re about to dive into. If you plan on investing your money in stocks, learn their language. If you are too innocent in these matters you increase the risk of you becoming prey. Yes, we do hire brokers and advisors because of their knowledge about the stock market, but you must also learn to help yourself make educated decisions.

Because of recent the roller coaster ride of the stock markets, it’s good that more and more people are keeping a stingy eye on Wall Street practices. The economy makes it hard to track progress for the stock markets, but don’t make money susceptible by being careless on choosing financial advice.

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