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Stock Trading Basics: Technical Analysis, Fundamental Analysis & Common Mistakes Explained

 Many new traders enter the stock market with excitement but little understanding. They hear success stories online, open a trading account, and start trading immediately. Unfortunately, this often leads to losses.



In this blog, we will answer some of the most searched beginner questions in stock trading, including:

  • What is technical analysis in stock trading?

  • What is fundamental analysis in stock trading?

  • How to avoid common stock trading mistakes

  • How to set stop-loss orders in stock trading

Let’s explain everything in simple words.


What Is Technical Analysis in Stock Trading?

Technical analysis in stock trading is the study of price movement and charts.

Instead of focusing on company news or profits, technical analysis looks at:

  • Price charts

  • Trends

  • Support and resistance

  • Indicators like RSI, MACD, Moving Averages

Simple Example:

If a stock price keeps bouncing from the same level again and again, traders believe that level is strong support.

Technical analysis helps traders:

  • Decide when to buy

  • Decide when to sell

  • Understand market trends

📌 It is mostly used by:

  • Short-term traders

  • Day traders

  • Swing traders


What Is Fundamental Analysis in Stock Trading?

Fundamental analysis in stock trading focuses on the financial health of a company.

It answers one main question:
👉 Is this company worth investing in?

Fundamental analysis looks at:

  • Company revenue and profit

  • Balance sheet

  • Debt levels

  • Industry growth

  • Economic conditions

Simple Example:

If a company has strong profits, low debt, and future growth plans, investors believe its stock price may rise over time.

📌 It is mostly used by:

  • Long-term investors

  • Value investors

  • Portfolio builders


How to Avoid Common Stock Trading Mistakes

Most traders lose money not because trading is bad, but because of simple mistakes.

1. Trading Without a Plan

Entering trades randomly is like gambling.

✅ Always have:

  • Entry point

  • Exit point

  • Risk limit


2. Overtrading

More trades ≠ more profit.

❌ Too many trades = more losses + stress
✅ Trade only quality setups


3. Ignoring Risk Management

Many beginners risk too much on one trade.

Rule:
👉 Never risk more than 1–2% of your capital per trade.


4. Emotional Trading

Fear and greed are the biggest enemies.

  • Fear makes you exit early

  • Greed makes you hold too long

📌 Discipline is more important than strategy.


How to Set Stop-Loss Orders in Stock Trading

stop-loss order in stock trading is used to limit losses.

It automatically closes your trade when price reaches a certain level.

Why Stop-Loss Is Important

  • Protects your capital

  • Controls emotions

  • Keeps losses small


How to Set Stop-Loss (Simple Method)

Method 1: Support & Resistance

  • Buy near support → stop-loss below support

  • Sell near resistance → stop-loss above resistance

Method 2: Percentage Method

  • Example: 2% stop-loss per trade

Method 3: Risk-Reward Method

  • Risk 1 unit to gain 2 or 3 units

  • Example: Risk $10 to earn $20–$30

📌 Every trade should have a stop-loss. No exception.


Final Thoughts for New Stock Traders

Stock trading is not about luck. It is about:

  • Knowledge

  • Discipline

  • Risk control

  • Patience

If you understand:
✔ Technical analysis
✔ Fundamental analysis
✔ Common mistakes
✔ Proper stop-loss usage

You already have a strong foundation that most beginners don’t.

Start slow, stay consistent, and focus on learning — profits will follow.

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