Stock trading online has brought convenience and increased flexibility to average traders. They no longer have to fight it out on the overcrowded exchanges. With the advent of enhanced internet connectivity and trading systems, traders can now place online orders without calling brokers.
Traders can make mistakes, and in certain cases they will lose their investment. Although trading systems give traders complete autonomy and a stress-free experience in trading, it doesn’t mean that they should be left unattended. As the system is programmed with rules by the user, it’s important to check it periodically. Look at the mistakes online traders make.
Avoid the infamous BTST
As a trader you have probably heard of the term BTST. Brokers use this phrase to encourage traders to increase profits, while reducing risk. It is a way to compensate the broker for any possible losses. It happens when the broker receives a lengthy list of elements that are risky, and you sign it. This exposes you directly to those risks rather than providing you with adequate protection.
It is important to understand that brokerage firms encourage daily trading as they get paid commissions. They will get a commission if they wait 2 days. However, if you trade every day you pay them daily commission. BTST should not be used as a trading strategy. Why take all the risks, when your goal is to minimize them?
Penny Stocks: The second mistake.
It may appear that low-priced penny stocks will attract you, but they may not be as attractive because of the lack of demand for these stocks. These penny stocks will be used when promoters want to use synchronized effort to manipulate them in their favor. Penny stocks will only be in action at these times, since they are usually dormant.
Many traders are deceived when they see the sudden surge of online tips and recommendations in support of penny shares. This leads traders to think that the stocks are a good investment because they offer low rates. This is a trap that will lead you to lose your money.
The Morning Frenzy is a Mistake No. 3
You need to be able to control yourself so you don’t get caught up in the morning frenzy. Stock trading is a time-consuming activity that requires a lot of effort. You would be wasting your time if you placed an order and then checked the market reports at night.
Volatility is caused by the many pending orders which were made over the night. These orders are then executed in the early morning. Trading is a skill that requires experience. If you have trading knowledge, you will not be affected by this sudden surge of news. You may not have yet placed an order if you’re an amateur. You should avoid placing orders like this as you will see the volatility of prices affect them significantly.
Some people commit general mistakes, like relying too much on their systems and spending insufficient time to refine their strategy. The 3 mistakes above show what happens when traders change their strategy and start to misuse the system. The mistakes that have been highlighted here should help you to understand the potential areas where you may not want to venture.