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Derivative | August 19
Mistakes committed by traders while trading in derivatives

Committing mistakes is a part of the learning process when it comes to trading or investing. Investors are majorly involved in holdings for a longer duration and they will trade in stocks, exchange traded funds, and other securities. Traders generally buy and sell futures and options, hold those positions for shorter periods, and are involved in a greater number of transactions.

 

Making mistakes is a part of learning process when it comes to investing or trading. In equity trading India investors are typically involved in buying and selling of future options and holding positions for a shorter period of time.  The following are some of the, mistakes that are committed by traders while trading in derivatives

 

No trading Plan - If one has to practice derivative trading in India, then the trader or investor should have a well-defined trading plan which should talk about the goals and the objective of the trading or investment. An investor with a defined trading plan would know their entry as well their exit points in the market. On the other hand beginner trader may or may not have a trading plan and if they have one they may be more prone to stray from the defined plan than would seasoned traders.

 

Ignoring Risk - In the field of trading one should not never forget the capacity to bear risk. Some investors can cope up with highly volatile market while others can, in this case the investor should exit the market timely so that he doesn’t have to bear extra normal losses.

 

Not Using STOP-LOSS – A big indicator that you don’t have trading plan is that you don’t use STOP-LOSS in your trade orders. Stop Loss orders are executed automatically once perimeters you set are met.Tight stop losses generally mean that losses are minimised before they become large or sizeable.  Stop loss helps one to minimize the risk and helps to avoid extra losses and keeps the position of the investor intact.

Hence by taking care of the above few points investors can avoid these common mistakes and can have a successful trading strategy

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