Mistakes to Avoid While Trading in a Bull Market

India Stock market are going through a Bull phase and is the best performing market for 2021. When the equity markets make front page news, especially the highs of the indices and the millions of gains in market cap, new traders begin to take notice.As market keep rising every day many traders are getting attracted towards it making fast bucks. Today we are discussing the thought process of new trader and the corrective steps which traders should start implementing before their trading account goes for a toss

The recent rally in the stock markets has everyone thinking we are in a bull market. It is often presumed that making money in a bull market is easy. And while there are several success stories, there are plenty of failures as well.

Unfortunately, there is no formula for sure-shot success in the stock markets. But there are some common mistakes investors can avoid.

Here are some mistakes Traders must avoid while Trading in a bull market

  • I have a few thousand , I will turn it into a lakhs quickly by trading Options

The bigger the attempted return the higher the probability of going to zero, Options is a “ZERO” Sum game. Compounding capital over the long term is what it takes to be successful taking big risks eventually takes your account down to where it breaks you financially, emotionally, or mentally.

  • I am “THE BEST” I can figure trading out all by myself.

New traders must find educational resources that shorten their learning time frame and saves them thousands of hours by not having to learn everything the hard way themselves.

  • I expect to be profitable from the very beginning.

Like any other professional endeavor you have to pay our tuition for education and pay your dues. The odds that you will be profitable right from the start is minimal to zero, not blowing up your account as a new trader is an accomplishment to be proud of.

  • Do not sacrifice quality for anything.

The rising tide allows lightweights to also soar. Do not use the price as an indicator of how good a stock is. What you see as the rise in the price of the stock is in the past and is history. What will matter to you is how the stock will behave in the future. While it is not possible to predict the future with any degree of certainty, you need to have an investment thesis or a basic set of reasons why you bought a stock.

  • My friend made a killing in the stock markets. Maybe it’s time I buy more.’ Following herd mentality

    As mentioned before, self-proclaimed geniuses are a by-product of every bull run. Having made some money in a bull market, everyone is bragging about their stellar returns, tempting investors into buying to play catch-up. But, in this case, try to live with this feeling of FOMO, as the Millenials would call it. It is far better than making costly irreversible mistakes investors will soon come to regret. ‘What the wise do in the beginning, fools do in the end’. – Warren Buffett.

  • Keep Booking your profits

Many traders/investors wonder if  booking profits is good or will i miss the further rally in my stocks. Its always good to book profit.There is a basic rule in the stock markets that “If something is too good to be true, then it is probably not true”. You must follow the same principal when the markets are maintaining a bullish trajectory. Keep taking profits at regular intervals although you can also re-enter the same stock at higher levels. In a bull market, profit is what booked; all else is just book profits.

  •  I expect to make huge profits my first year trading.

Think practically if it was so easy to make money why people are doing other business, there is no easy money laying around on the street for us to just go pick up.

  • I can trade huge position sizes and never blow out my account or suffer a huge draw down.

The math disagrees agrees with you, big trades eventually lead to big losses and big enough trades eventually lead to ruin.

  • I want to trade for a living, it will be great.

Trading for a living is very stressful if not planned very carefully with huge savings and safety nets. For most people it would take multiple six figure trading accounts or even up to a million to even consider such a thing with their current lifestyle expenses. Very few traders live off trading alone almost all have other sources of income and trade for capital appreciation not their monthly bills. Trading for a Living

  • I will just trade with all my savings and salary and take it out when needed to pay monthly expenses.

Trading capital has to be separate from living expenses and only taken from at times that will not effect your need to pay bills or play catch up with returns.

Leave a Reply