10 Common Trading Mistakes New PSX Investors Make
Short answer
The mistakes that cost new investors most are buying on tips, putting everything in one stock, selling in a panic and ignoring costs. The fixes are simple: research before you buy, spread your money, decide your selling price in advance, and try your ideas on the simulator first, with no real money.
1. No research: buying on a friend’s tip
A tip is not research. Before you buy, know what the company does, how it earns money and what you are paying for each rupee of earnings. The first-stock checklist takes ten minutes.
2. Panic selling
A 5% dip in a day is normal market movement. Decide before you buy how much of a fall you can accept, so a bad day does not make the decision for you.
3. Putting all your money in one stock
One bad headline can then cost you most of your money. Spread it across several companies and sectors. See Portfolio Management.
4. Ignoring fees
Brokerage commission, CDC charges and tax come out of every trade, and many small trades add up. Know the costs before you trade; see tax on PSX trading and dividends.
5. Chasing social media “toofani” stocks
Stocks hyped online often rise fast and fall faster, and by the time you hear about one, early buyers may already be selling. If you cannot explain why it should keep rising, do not buy it.
6. No exit plan
Decide your selling price before you buy, both the price at which you take profit and the price at which you accept you were wrong.
7. Using leverage (margin)
Borrowing to buy magnifies losses as well as gains, and you still owe the money after a fall. Learn with your own money first, or on the simulator, with no real money.
8. Overconfidence after a few wins
A few good trades can be luck. Keep your position sizes the same and keep checking your reasons, because markets change fast.
9. Trading too frequently
Each trade costs commission and tax, and frequent trading needs frequent correct decisions. Fewer, better-researched trades usually serve a beginner better.
10. Not learning from mistakes
Keep a trading journal: why you bought, what you expected, what happened. The simulator keeps a record of every transaction, so you can review your own decisions.