People often make mistakes buying and selling shares. It is a part and parcel of the learning process. But the prevalence of common sense while buying and selling share separates a successful and a failed trader. Be it experienced or inexperienced all have made mistakes because they at the critical movements have not used their common sense.
Nobody can be 100 percent sure or perfect, but knowing some common investing mistakes, traders can avoid losses, especially a huge one. Let us look at Indian stock market overview and also some of the most common buying/selling mistakes
- Irrelevant tips
It is often seen that people purchase shares just because some friend or relative purchased it or have recommended it, that these stocks will give high returns because the company is coming out with extraordinary new or innovative product that will sweep the market. Even though this news may be true but it is not necessarily it is a next big thing, and you accumulate the shares in huge quantity.
Even you can see commercial TV channels beaming views expressed by share consultants that have recommended to buy/sell of a particular company. It may turn out that they are paid to break such a news so that prices rise / fall. And once you buy /sell share prices will fall/rise. A point here is you are not the only one watching that particular channel. There are thousands out there viewing the same channel as yours. They are nothing more than speculative talks.
Though few stock tips are accompanied by logic, reasoning, analysis, and calculations, and may come true. One can depend on these types of tips or recommendations. It is better to take these with your personal common sense and research. Research about the promoters, take opinion from other unbiased traders.
- Cheap Stocks
Usually, people buy/sell shares by analyzing them by the criteria of 52 weeks high / low. They use this as thumb rule that is, to purchase stocks which are trending towards its 52 weeks low, so that they will now rise. Or sell stocks which are trending towards 52 weeks high, as there will not be much chance of appreciation. There may be a reason for company’s share price appreciated or depreciated depending upon the conditions at that time of the year. It is not necessary that those conditions may be same this year too. One should analyze the reason of rise or fall of a price before coming to any conclusion.
Change of CEO, competition conditions, company’s fundamentals and other conditions at that time of the year affect the price of shares at that time which at present time may not be true or viable. It is important to view all these factors why prices are low, it may give a false buy signal.
One should buy shares of a company which you think will have a sustainable growth path. Don’t purchase just because they are available cheap. What if the company is unable to recover from its losses? You might lose your investment then.
- Non-holistic approach
When buying stock, one should not look through only one angle but should take the holistic view. One should go through the fundamental and technical analysis of the company. In this fast-changing world certain companies may be in great demand presently but after a lapse of time, they may be outdated. Pagers were quit in demand but within a period of one and a half year as soon as mobile was launched, pagers discarded suddenly. One should also see that will the emerging industry will last long enough, when you wish to go in for long time investment.