It is one thing to know the mistakes before getting into a trade. But the real challenge is to avoid the mistakes after the trade. That is where you emotions run high because you money is on the block.

Overtrading is another common mistake that investor make. When you overtrade, the commissions and the statutory charges add up to quite a bit. Taxes are another dimension. You need to look at keeping your expenses low. That is how you make returns on your investments. Your focus should be more on identifying and staying with quality stocks.

Many investors mistake blue chips as great stocks. Remember, not all great companies are great stocks. For example L&T continues to be an iconic company but it has disappointed shareholders over the last 9 years. You earn alpha on stocks when you get into the stock at the right time. Eicher was a great buy in 2009, but almost fairly priced at current levels.

Another mistake is in not knowing how much risk to take in the market. Whether you are loaded with money or not, you still come into the market with finite capital. That means you need to manage your risk to ensure that you don’t lose more capital than you can afford to lose.

Averaging your positions is a cardinal sin. You may have made money averaging a stock but there are 2 key risks in averaging a stock. Firstly, you made a decision and it turned out to be wrong. By averaging, you are making the same mistake twice. Secondly, averaging can inordinately skew your ownership of certain sectors and themes and that could impact your overall risk and portfolio performance.

Trying to time the market is another sin in the market. Remember, nobody caught the bottom or the top of the market convincingly. You can just look at value on a relative basis. Timing the market is a zero-sum game. Over a period of time you will lose more money than you make. Focus on stocks, stories and value. That will be a better bet!

Don’t be in a hurry to book profits. This is a strange rule but this is what differentiates the good investor from a great investor. At the end of the day even the best of investors get 7 out of 10 calls correct. The difference is that when they are right, they hold long enough and when they are wrong they are quick to exit.

We are talking about trading and about investing in the above instance. You do not need an expert to tell you that the real emotions of the stock market are only felt once you have entered into the trade because that is when your money has been already committed. It is one thing to understand the market and another type of challenge to avoid mistakes once your trade is initiated. Focus more on the latter.