A huge amount of small-time metal traders lose their money and quit the game early on. This leaves their potential winnings open to the minority of more successful traders. The latter group aren’t any more successful because they’re in on big trade secrets.
Mainly, it’s down to inexperienced traders making foolhardy mistakes. If you’re about to enter the world of precious metal trading, then it’s important to avoid these.
One of the most common slip-ups made by new metal traders is investing without a solid plan in place. Some people, having realised they’re good with money, will jump right into investing, with the attitude that they’ll wing it.
It seems simple; buy for a low price and then sell for a high one, right? If only trading was so one-dimensional! If you’re planning to trade precious metals and draw a profit from it, there are a lot of different factors you need to understand.
There are several markets where you can trade precious metals, each with their own benefits and disadvantages. If you can’t tell a krugerrand from a silver dollar, then I recommend doing a lot of research before your first investment.
Another common error made by new metal traders is buying rare coins over bullion. Unless you’re a numismatic expert, you should avoid rare coins altogether. The value of rare coins can be incredibly volatile.
Partly, it’s determined by the purity of the precious metal in the coin. A number of other factors are used to determine the rarity, which can fluctuate often and be very hard to assess. If you buy bullion coins and bars through a trusted dealer on the other hand, you’ll know exactly where you stand.
There’s another significant risk in buying rare coins, as you’re making yourself a pretty big target for scammers. There are a lot of fake coins in circulation, and buying these can be equated to burning your money!
Finally, make sure it’s your logic, and not your emotions, driving your trade. This is possibly the most damaging mistake a new trader can make. When you first start trading, it can be surprisingly easy to become emotionally invested in your trading.
After you first purchase that bullion, it’s natural to want to see your trade succeed. If this feeling gets far too much, it can cloud your judgement. This leads to traders going back on their plans, or holding onto losses for far too long.
You should be wary of your emotions even if things appear to be going well too. For example, your bullion could shoot up in value, and you might close out in a flurry of excitement.
Such rash moves could mean you’re cheating yourself out of more profit further down the line. When trading precious metals, you need to be able to take losses in your stride, and see gains objectively.
Be wary of all three of these mistakes when trading precious metals. This niche isn’t the safest in the world, but with the right approach you can make an absolute killing!
Featured photo source: Pixabay