One of the biggest pitfalls that every beginner trader faces is breaking away from a gambling mindset. In fact, it can be so bad that trading can even become an addiction like gambling and it’s very easy to fall into that hole. In this post, we’re going to take a look at a couple of ways to approach trading that are free from a gambler’s mindset.
Make informed decisions, not wild guesses
The first thing to remember is that all of your investments should be informed decisions and not wild guesses. This is because you want to actually use some information to help you determine the odds of an investment. For example, if you look at the top battery companies and notice that some companies are trending due to new technologies they’ve been pushing, then those are companies that are more deserving of an investment because they’re actively doing something that could increase the worth of their business.
Far too many traders will take random guesses or follow their heart instead of their brain. Gut feelings can be helpful when it comes to trading, but the reality is that you need solid statistics and facts to actually make a smart decision that could benefit you.
Don’t risk what you can’t afford to lose
Perhaps the only thing that is similar between gambling and trading is that you should never risk what you can’t afford to lose. There have been many situations in the past where people will bet their entire life’s savings on stocks and end up losing all of their money across a single day of trading. There are no sure investments that will grow 100% over the course of the day and you need to realize that you can’t just throw money around when trading.
Instead, set up your own trading plan. For instance, set a limit for when you should pull out of a trade and don’t purchase stocks that are below a certain threshold that you have personalized. This will help you approach trading with a steady mindset instead of a luck-based mentality.
Understand that trading is accumulating wealth, not winning the lottery
Of course, there are going to be times where your investments into a relatively small business could turn into a huge profit because the company grows a lot in a short period of time. However, you should remember that trading is all about winning small victories. It’s about building your wealth slowly with informed decisions and knowing when to cut your losses so that you don’t lose even more money on a bad investment.
If you ever feel doubtful about some stocks or your gut is telling you not to risk it, then you should probably listen to yourself. You don’t have to aim to earn a certain amount of money each day and you don’t even need to set yourself goals to reach each week. Instead, you should focus more on how you can slowly build up your wealth so that you have more capital to play with and more experience under your belt.