5 Huge Trading Mistakes to Avoid at all Costs when Trading on the BSE

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The stock market is an exciting venture – with plenty of success stories. With that said, not all traders are successful. Here are a few mistakes that will help you avoid unsuccessful investments and help you get started on the right track.

As the oldest and most popular stock exchange in India, the Bombay Stock Exchange is the exchange most used by beginner investors. Here, in this post, you can find helpful tips to avoid common mistakes made by newbie investors when they start trading on the Bombay Stock Exchange.

BSE Trading Mistakes to Stay Clear at All Costs

#1: Buying Stocks without a Plan or Strategy

As the biggest stock market in the country, the BSE has thousands of stocks. Very often new traders make this fatal mistake – they purchase a particular stock (usually the very first ones they come across) and hope that the price would rise.

Before you purchase any stock, you need to have a well-defined plan. Here are a few questions that you should ask yourself before making a trade:

  • What is my goal? Long-term gains or short-term gains?
  • What is my target price?
  • How much money am I willing to risk?
  • What are my entry and exit points?

Make sure that you find the answers to all these questions, before initiating a trade. Additionally, it’s recommended to have an overall plan on what you wish to gain from stock market trading.

#2: Not Cutting Losses Quickly

This is one of the biggest mistakes and is the reason for the majority of traders losing their money. As humans, we don’t want to accept that we’ve made a mistake. It’s natural for us to hold on to a losing investment, in the hope that the tides will turn.

As a trader, you have to identify your mistakes as quickly as possible and try to minimise your losses. You must have the answer to this question at all times, “how much am I willing to risk on this trade?”

You need to cut your losses and exit the trade before incurring huge losses. This is why most experts recommend that you set up stop losses on your trading account before you begin the trade on the Bombay Stock Exchange or any other exchange.

#3: Failing to Do your Homework

Very often, new traders are guilty of failing to do their homework. They don’t spend time on adequate research and analysis before initiating a trade. They let the urgency of starting a trade overwhelm the need for research.

Buying on unfounded tips, you come across on print and online media, or listening to your friends’ suggestions is not the way to become a successful trader. You need to assess the stocks and figure out if it fits into your investment strategy, before making a decision.

#4: Trading on Multiple Exchanges

As a beginner investor, you have to stick to a single market. Say, if you have chosen the Bombay Stock Exchange, then concentrate only on the stocks listed there. Once you gain experience and expertise, you can start considering other markets like the NSE.

#5: Ignoring Fees and Taxes

Trading on the stock market comes with its tax consequences. So, before you start trading make sure to consider the tax implications and figure out if it fits into your overall investment goals.

When choosing a trading agent or broker, make sure to consider brokerage and trading fees. Look for brokerage firms that have transparent fees to avoid sticker shocks later on.

Learn from the Mistakes of Others

The stock market is notorious for rewarding huge gains as well as huge losses. As an individual investor, you cannot afford to make all the mistakes on your own. So, look at what other experienced stock traders are doing and learn from them.

Above all, devise an investment strategy that suits you and stick to it.

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About the Author: Donald Phillips