Investing in the stock market can be incredibly rewarding—but
only when approached with strategy, discipline, and knowledge. Whether
you're a beginner or looking to sharpen your approach, understanding what
to do and what to avoid during share trading is critical to long-term success.
In this guide, we’ll walk through essential dos and don'ts during
share trading to help you steer clear of common pitfalls and maximize
your trading potential.
✅ Do: Always Have a Clear Trading Plan
Before placing any trade, make sure you have a well-defined
strategy. A solid trading plan includes:
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Entry and exit points
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Risk management protocols
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Target profit levels
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Capital allocation
Spend time analyzing both fundamental analysis (such
as company financials) and technical analysis (like chart patterns
and indicators). This preparation will give you the confidence to make
rational decisions rather than reactive ones. Also, stay up-to-date with
financial news that may impact the markets. Economic data, interest rate
decisions, and geopolitical events can all influence your trading outcomes.
❌ Don't: Trade on Impulse or Emotion
Trading based on gut feeling or excitement often leads to
losses. Emotional trading is one of the biggest mistakes novice traders
make. If you’re jumping into a trade without clear objectives or planning,
it’s no different from gambling. Common emotional traps include:
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Greed: Holding onto winning positions too long
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Fear: Exiting trades too early due to market fluctuations
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Overconfidence: Taking oversized positions without
justification
Discipline and objectivity are key to long-term profitability.
✅ Do: Cut Losses Quickly and Let Profits Run
A fundamental rule in share trading is: cut your losses
short and let your profits run. It sounds simple, but sticking to it
takes discipline. Many traders fail because they:
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Hold onto losing positions hoping they’ll rebound
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Panic sell winning trades too early
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Let emotions override strategy
Having stop-loss orders and profit targets in place can protect
your capital and ensure consistent performance.
❌ Don't: Trade Low-Volume or Inactive Stocks
Avoid wasting time on stocks that show low trading volume
or minimal movement. These stocks:
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Have poor liquidity
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Are harder to enter and exit without slippage
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May be prone to manipulation
Focus instead on active, high-potential stocks that
could offer substantial returns—aim for at least 25% upside within a
few weeks or months. This approach is more likely to yield meaningful gains.
✅ Do: Learn the Art of Short Selling
Short selling is a powerful strategy to profit when
share prices fall. It involves borrowing shares to sell now, and buying
them back later at a lower price. Why it matters:
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Stocks often fall faster than they rise
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Market downturns present major profit opportunities
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Short selling is vital during economic crises or bearish
markets
Learning to short effectively gives you an edge in all market
conditions.
❌ Don't: Risk Money You Can’t Afford to Lose
Only trade with money you can afford to lose—ideally, your
disposable income or extra savings. Never invest:
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Your emergency fund
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Retirement savings
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Your child’s education money
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Borrowed money or credit
Stock trading comes with risk, and protecting your financial
foundation should always be your top priority.
✅ Do: Stay Educated and Keep Improving
The stock market evolves constantly. Stay informed by:
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Reading financial news
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Watching expert analysis
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Participating in webinars or online courses
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Backtesting your trading strategies
Continuous learning will help you adapt and grow, regardless
of market trends.
FAQs on Share Trading Dos and Don’ts
1. Why is having a trading plan important?
A plan keeps you focused, reduces emotional decisions, and
sets clear goals for profit and risk.
2. What is the biggest mistake beginners make in trading?
Trading based on emotions without a strategy—often driven
by fear, greed, or rumors.
3. Is short selling safe for beginners?
Short selling is more advanced and comes with higher risk.
Beginners should learn thoroughly before attempting it.
4. How do I know when to cut losses?
Use stop-loss orders and stick to your trading plan. If a
trade goes against you beyond your risk threshold, exit.
5. Should I follow stock tips from friends or social media?
No. Always do your own research. What works for one trader
might not suit your strategy or risk profile.
6. How much money should I start with in stock trading?
Start small—only invest what you can afford to lose. Gradually
increase as you gain experience and confidence.
Conclusion: Smart Trading Starts With Smart Habits
Understanding the dos and don'ts during share trading
can protect your portfolio from costly errors and lead you toward sustainable
success. Focus on discipline, continuous learning, and strategy. Always
trade with caution, and remember—the stock market is a marathon, not
a sprint.
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