10 Common Mistakes Beginner Investors and Traders Often Make

          There's a saying the author likes and uses as a life motto: “Mistakes are the most expensive lessons, but the best teachers.” Of course, we don't need to make our own mistakes to learn (even though it's a very effective way of learning). We can use others' mistakes as valuable lessons for ourselves. In this article, we've compiled 10 investment mistakes that will surely serve as great lessons for those entering the investment world.

1. Having unrealistic return expectations

       Having unrealistic return expectations is a common pitfall for novice investors. The desire for big profits can lead to poor decision-making, such as investing in overly risky assets or trading too frequently, which may result in losses. Instead of hoping to get rich quick, it's better to set reasonable goals based on market conditions and plan investments carefully. Thorough research and understanding your risk tolerance will help you invest more effectively. Gradually gaining experience is more likely to lead to success than rushing for quick results.

2. Lack of clear investment goals

Not having clear investment goals is a major problem for new investors. Without specific objectives, investment decisions often lack direction, making it difficult to assess whether investments are successful or not. Investors should set clear short-term and long-term goals, such as desired returns for different time periods and acceptable risk levels. Having clear goals helps in better investment planning, choosing appropriate assets, and adjusting strategies promptly when results don't meet expectations. Therefore, before starting to invest, always take time to think about and write down your personal goals clearly.

3. Focusing too much on short-term results

Focusing too much on short-term results is a trap for novice investors. They often overlook good opportunities that could yield growth in the future because they're only interested in quick profits. Most tend to be highly emotional in their trading, risking significant losses. Moreover, when they do lose, they might miss out on the growth potential of fundamentally strong companies. Investors should consider both quick profit opportunities and gradual growth, carefully weighing risks against returns. Don't be too hasty, but also don't wait so long that you miss good opportunities.

4. Over-relying on indicators without learning price action analysis

For active traders, relying too heavily on indicators without learning price action analysis is a common mistake. Some indicators may not show certain signals that price movements reveal, causing missed trading opportunities. Additionally, using indicators alone without understanding true price behavior can lead to faulty analysis and poor decisions. Therefore, investors should learn price action analysis alongside using indicators to gain a more comprehensive and accurate perspective. This approach can increase the chances of profiting from market investments.

5. Overtrading

Anxiety or greed can push us to trade too frequently. Overtrading, especially during volatile market conditions, can lead to increased risk and higher fees. Frequent trading may also result in poor decisions based on momentary emotions rather than sticking to a planned strategy. The solution is to have a clear trading strategy and adhere to it. Set goals, entry and exit points, and risk management plans in advance to avoid impulsive decisions. Trading with discipline and patience will help reduce portfolio volatility.

6. Misjudging risk, either taking on too much or too little

Taking on excessive risk can lead to significant losses, while being overly cautious might result in missed profit opportunities. The solution is to find a balance by considering your investment goals, assessing market conditions, and diversifying risk appropriately. Additionally, it's important to thoroughly research information, analyze various factors that may impact investments, and adjust strategies according to changing market conditions. Effective risk management helps investors handle volatility and achieve financial goals steadily.

7. Buying high and selling low due to emotional decisions

Normally, we aim to buy low and sell high for profit. However, buying high and selling low is common in the market, often resulting from impulsive emotional decisions, especially fear and greed, which greatly influence investment behavior. For example, rushing to buy when prices soar due to fear of missing out, or panic-selling when prices plummet, leading to unnecessary losses. Instead, investors should have a clear investment plan and stick to principles, carefully analyze information before making decisions, and not let momentary emotions cloud their judgment.

8. Following friends' or acquaintances' trades

Trading based on friends' or acquaintances' recommendations is a major mistake often made by novice investors who enter the market without sufficient knowledge. They also can't assess how knowledgeable their friends really are. It's better to acquire basic knowledge and at least understand how your friends analyze investments, what strategies they use, and their risk tolerance.

Without personal analysis and decision-making, you might invest in something unsuitable for your financial situation or risk tolerance. While advice from acquaintances may sound credible, it doesn't guarantee good results. Before investing, thoroughly study and analyze information yourself, rather than just listening to others.

9. Failing to separate noise from important information

Not distinguishing between noise and useful information is a common problem for novice investors. Amidst the vast amount of financial data, poor decisions can easily occur without proper filtering. Investors may waste time and energy on rumors or irrelevant opinions instead of focusing on fundamental factors and information that truly impact investments. Therefore, practice the skill of discerning and analyzing information. Good investors should learn to focus only on directly relevant information and not get carried away by trends or news that don't affect decision-making.

10. Analyzing the market using a single time frame

A tip for traders: analyzing the market using only one time frame is a mistake many overlook. It can cause you to miss signals or trends occurring in other periods. Looking at just one perspective lacks a comprehensive market overview, which can lead to poor decisions. It's recommended to consider multiple time frames simultaneously, such as daily, weekly, and monthly, to get a clearer market direction. Viewing multiple time frames helps better understand price behavior.

Conclusion

The best investment with the highest long-term returns is investing in yourself. Before starting to invest in financial markets, we should develop financial and investment knowledge, study basic principles, strategies, and various tools continuously to build a strong foundation for investment decisions. Learn to analyze data rationally and control emotions to prevent them from affecting decisions. Don't forget to maintain stable health and emotions, as they will help you invest most effectively.