2020 promises a new year of profits as the stock market still outperforms the U.S. dollar on a yearly basis. Aside from some market pitfalls that you should avoid, the new year will give us endless opportunities to profit from. Leading banks and top agencies are cautioning the markets, however. These financiers want investors, like you, to be aware of the common traps in stock trading. Here’s a better look at the pitfalls that you must avoid in the financial market:
Leaving Your Money in the Bank too Long
Many investors make the mistake of lacking the right proactivity for their money. Research shows that we tend to hold money too long—to our own hurt. You can’t profit from 2020’s rallies if your money sits in a savings account. Sure there are millions of reasons why you might shy away from investing. Though market conditions aren’t always favorable, perfect markets are only profitable when you invest into them beforehand.
Putting all of Your Hopes into a Single Asset
The second, hidden pitfall appears when putting your entire fund into a single bet. Let’s just assume that you’ve done your research on a stock and have confidence in it. Now imagine the stock performing well—with a healthy profit margin. It only takes a day for things to go sour and for your emotions to bring down your balance. Putting all of your money into one trade gets you so worked up that you’ll make bad decisions.
Trading Without Flexibility in Your Approach
The third mistake of stock investors is encountered when they lack flexibility. Yes, your trading method should work around routine parameters, but these strategies need to account for ALL market conditions. Some traders fail to adjust their approach as the market changes; this is harmful to their emotions and their personal finances.
Failing to Track Your Balance or Administer Real Accounting
Our last trap is an unbalanced-balance sheet. This happens when you have a portfolio of multiple assets to track. Rebalancing a fund can only happen when you know the gains and losses from all of your stocks. If, for example, you gain 20 percent from one asset but loss 27.6 percent in another, then you now have a total loss of 7.6 percent. Don’t let one success alter the real numbers behind your trades.
