After impulsive trading and intraday trading the biggest mistake traders commit is a no plan in trading. Learn why planning is important in trading.
This series in continuation to the mistake traders to while trading or investing in stock markets.
No Plan In Trading:
After impulsive trading and intraday trading one of the biggest mistake traders do is no plan in trading. Traders trade just to make money, when you ask them how much they want to make in that trade, they fail to answer that question. When you ask them where you will take a loss, again they say they do not know, but then if pressured they will say they are absolutely sure that they will make a profit. This is am amazing traders psychology that ever experts fail to understand.
The above is a clear case of no plan trading.
They do not know where to take a profit or where to take a loss. This obviously leads to losses and then they turn to tips providers, for of course, more losses.
If the path to your destination is not clear, how will you ever reach there? You can’t.
Plan your trader well. Before you trade, ask yourself why are you trading this? What is the reason? What is your profit target? What is the maximum your loss you are willing to take? If all these are not answered, do not trade because you are trading without a plan.
Trading Without A Plan Is Dangerous.
No Goals or Objectives of Trading or Investing:
Yes we trade to make money. But just making money is not enough, you must know the following also:
- Why do you want to make more money?
- How much money you need and in how much time?
- If you are investing as a retirement planning then what is your target every month so that you reach your goals in time?
- What is the maximum risk you ate willing to take?
- What will you do if the maximum risk you are willing to take is lost while trading?
The above comes under goals and objectives of investing and trading. If you are not trading with any goals and objectives in mind your goals may not be met. It is not just money which is important, the time to achieve it is also important.
If you need 10 lakhs for your kids higher education and time left is 5 years, then you must ensure that you make and save at least 2 lakhs a year. This is 16,000 a month.
If you are losing money trading forget about reaching your goals, you may not be able to meet daily expenses after a few years.
If you are planning for retirement then you must be able to save and make at least one crore by the age of 60 to live a peaceful retired life. You read my retirement planning book to achieve that goal.
You can easily calculate how much you need to save every month to reach that goal according to your age. If you are not meeting your goal you are trading without a target.
Trade with a target and goal in mind. Trading without a target is like working hard to get something that you do not know you will ever get or not, and when.
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