To err is human. We all know that but to err while trading in stocks can be disastrously fatal for your financial health. 5Trades.com, leveraging on the extensive experience of its developers and promoters, identifies 10 most common but fatal mistakes that we tend to make. These should be avoided at all costs else their costs are high enough for us to pay through our nose. Browse through the list and be alarmed at ones you’ve been committing or are close to:

1. It’s no party out there

2. Ego? That’s no word in trading dictionary

3. Our letter words are a big NO

4. Money not meant for trading is not meant for loosing

5. Trading Plan? What on Earth is that?

6. Do not count your chickens before they hatch

7. Oh... This is beyond me now...

8. I just reacted Wish to go off track, change strategy by the hour

9. I should have got out of it earlier

10. It pays to flirt, falling in love is a sin

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1. It’s no party out there

Trading in stocks is a serious business. It’s no party out there that you gatecrash just for kicks. If you are looking for excitement, thrill and fun, may we suggest that a casino is the right place for you! Stock market is not a game of roulette or poker that you bet your money in and wait for the wheel of fortune to stop at your number. And just in case it doesn’t you groan and try to recover your losses as fast as you can thereby loosing even more money. While it is a human tendency to grapple for what one has lost, it is not the right strategy at the stock exchange. The mantra is not to panic, be calm and patient and wait for the next big opportunity. DO NOT RUSH BACK IN.

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3. Four letter words are a big NO

HOPE, WISH, FEAR, PRAY - you are not in a temple to hope, wish and pray and neither have you been shoved into crusher that you fear of something unthinkable. These three four-letter words spell the doom for you. Please, please keep away form them. Markets have their very own system of moving up or down and no matter how much you hope, wish, fear or pray - they’ll behave as they have to and a loosing trade will not turn upside down into a winning one as an answer to all your hopes, wishes and prayers. When you are wrong, just add another word to your vocabulary - GET OUT (of the loosing trades that you’re in!)

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4. Money not meant for trading is not meant for loosing

If you happen to be a inveterate gambler, we have no advice to give. However, if you are not, please do not trade with money you really cannot afford to loose. Trade in stocks only with a surplus corpus meant for trading in stocks. You should not use money from an existing business, college or school fee, or for that matter money borrowed from someone to trade in stocks. If you know it at the back of your mind that the money you’ve invested in stocks is not meant for it and there’s a risk involved, you may trade out of fear and emotion rather than applying logic…it is human to do that. If by any chance, you are in the aforementioned situation, we strongly recommend that you stop trading until you’ve earned enough to set aside a corpus or account that you can truly afford to risk without any major financial setbacks.

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5. Trading Plan? What on Earth is that?

Money does not come on its own. One has to earn it - through a well devised plan and its successful execution. If you are a trader, ask yourself these questions:

--- Do I have a set of rules that tell me what to buy, when to buy and how much to buy, not just for the next trade, but for the next 10 trades?

--- Before I enter a trade, do I know when I will take profits out of it? Do I know when I will get out if I am wrong?
These questions form the first part of a trading plan. You cannot be successful at the bourses if you cannot answer these questions clearly and concisely.

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6. Do not count your chickens before they hatch

Of course, it is wonderful feeling to see your trades do well, putting you into a profitable situation. However, the success mantra is to hold your horses for the highly euphoric state that you are in may lead to daydreaming and expectations. But we all know that the root cause of all sorrows is expectations not met. In euphoria, you may loose track of the situation on ground. You may not be prepared to get out as the market reverses wiping off all the profits you were dreaming about. Just because you have convinced yourself of eventual positive outcome, there is a chance that you may deny yourself the reality. The simple formula is to know exactly where and how you’ll reap profits once you enter the trade and implement the strategy no matter how profitable the stock may be at that point in time.

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7. Oh... This is beyond me now...

One of the most common mistakes that we tend to make is to let things go out of our hands - out of our control. One often tends to let the losses grow too large. Though no one likes to take a loss, taking a small one in time circumvents situations wherein one is forced to take in large losses later. If you think great traders never take in a loss, you are miserably wrong. They may have made many losses but what separates the wheat from the chaff for them is the fact that they have an uncanny ability to recover quickly from a string of losses, bounce back at the next available opportunity and exit as profitably.

Every trader needs to develop a mechanism for getting out of losing trades quickly. One needs to research and learn to apply the best methods for placing protective ‘stop loss’ orders. The blueprint for success in situations where one has to recover from many small losing trades is to ensure that the winning trades are much larger such that they not just compensate for the loss but also post profits at the end of the day. The normal human psychology is that having faced a series of losses, big or small, one looses hold of the winning trade as well. We fear about it turning into a loosing trade too. One should not get affected by such fear psychosis and give ample time and room to profitable trades.

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8. I just reacted Wish to go off track, change strategy by the hour

Have faith in your trading plan or strategy. It is routine for markets to go high and low. Do not get perturbed easily and change strategy during the day while the markets are still open. It is human for all of us to react, become emotional and express fear or greed. Barring some very visible signs that warrant change, key lies in planning the trading strategy before market opens and adhering to it religiously irrespective of crests and troughs.

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10. It pays to flirt, falling in love is a sin

While trading in stocks, there are no favorites. Getting fascinated and falling in love with a stock or two is a sin here. If you constantly look out for suitable opportunities to trade in those stocks only, while ignoring other profitable trade opportunities, you are committing a mistake for sure. Just flirt with stocks - attachments are a big no for such tendencies can be suicidal in terms of trading. It may be detrimental for your financial health.

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