You need to avoid most common mistakes made by traders losing money in the trading markets in order to become a profitable trader. I am going to discuss the most common mistakes traders make and give you some simple solutions to them in this article. It is up to you to learn from them and make sure to avoid them as you continue to analyze and trade the markets.
Being in More Than One Trade At A Time Over-Trading
There is no logical reason to be in more than one trade at a time. If you find that you’re in more than one trade at a time, it is most likely that you’re trading too much. It is important to trade only one trade at a time, ever.
Most people are unable to resist the urge to trade. You are never going to make consistent profits trading unless you learn to control yourself and stop over trading.
The quickest and easiest way to stop over-trading is to think of trading as a business and follow your trading plan in order to making money trading.
Wasting Too Much Time Looking at Charts and Thinking about Trading
You often make the mistake of spending too much time flipping through the charts over and over. This means that you are not focusing on your trading plan. This leads you to take you wouldn’t normally take if you were following your trading plan. Over-trading is a very dangerous practice. You need to be aware of the effects of trading too much.
When you are trading, you should be trading what you understand. When you understand what you are doing, you will not make mistakes.
You must plan time away from the charts. That way, when you are away from the charts, it will be part of your plan and part of the process. If you are not planning time away from the charts, you are likely to get bored and frustrated.
Trading With Real Money Before You Practice On a Demo Account
This is a mistake that most beginners make. The mistake is that they begin trading with real money, before they even have tried the strategy on a demo account. This could be because they don’t know how to set up a demo account, or they may not be familiar with the platform and how it works. This could cause them to lose money when they should have won. This is an avoidable mistake, which can be avoided spending time learning how to use a demo account properly.
You must test your strategy on a demo trading platform before you start trading live. This will allow you to work out the bugs, and to get a feel about the market and your trading method, without risking real money.
Getting Pulled into News Distractions
The news distractions are real in the trading world, and if you’re not careful you will fall into it and never get out until all your money is gone. [News distractions are real, but if you can learn how to manage them, you will be able to make money from them.]
A ‘whipsaw’ is when the currency price rise rapidly as and when the news is released before falling back in the other direction. This is near impossible to trade and causes most uneducated traders losing their money. This is the main reason why you should not trade solely on news.
Trading the price action is a very effective way to trade the news without having to read or analyze any of the news.
Not Understanding Random Expectation of Trade
In trading there is a thinking error which most traders have. They believe that each trade has an equal chance of being a win or a loss. This is not the case. Even though there is an equal chance of a win or a loss in any trade, there is no guarantee that a trade will result in a win or loss. It is very possible to have a high-percentage winning strategy but it is not possible to know the sequence of wins and losses. But if you expect that your strategy will win 60% of the time, you can expect that percentage to manifest over a large enough sample size.
Remember that any one trade means essentially nothing! It is the end result of a large series of trades that will show you whether or not your edge and your ability to trade is actually profitable.
Sense of Desperation or Urgency to Trade
The feeling of desperation is usually an outcome of putting all your ‘eggs’ in one basket. Trading is inherently risky and difficult due to the fact that it requires such mental strength that many people simply don’t have or aren’t willing to develop. As a result they tend to make emotional decisions when in trading. These emotional decisions often have a negative effect on their trading.
Do not put all your eggs into one basket, because when you do that, you are putting too much pressure on yourself.
You may feel you need to make a lot of money in trading, but if you put too much pressure on yourself, you will fail. You have to be relaxed, calm and ready to take risks.
Not Trusting Your Decisions and Sticking to Them
There are many instances of traders freaking out when the market does not perform as they had anticipated. It is important to note that there is always going to be downside to trading. The trick is to learn from losing trades and move forward. If you freak out every time a trade goes against you, your account is going to blow up.
The only way to get good at trading is to trade more and more. The more trades you take the better you will get at them. If you think too much about every trade you take then you will never get good at trading. Your only job is to get out of the way and let the market take over.
Spending Too Much Time on The “money” and ‘reward’ and Not Enough on the Process
If you focus on your trading strategy, trading it properly, sticking to it, managing risk, position sizing etc, then you need not think about ‘rewards’ and ‘profits’. You need to focus on your trading process and let your trading do the talking.
Meddling in Trades after they’re Live
When it comes to trading, the most profitable course of action is to simply do nothing most of the time. The second best course of action is to look at the market and trade on the market trends. However, you need to understand the market and be able to trade it. You should avoid meddling with your trades after you trigger them because it can result in a loss.
The only way you can make consistent profits over the long run in the markets is by ignoring the temptation to mess around with your trades.
Chasing a Signal You Missed – Entering Late at a Bad Price
You will not enter the market after it has already taken off without you. This is the last thing you want to do. You need to wait for the next opportunity. Emotional thinking will only lead to losing money. Don’t be in a rush to trade, rather wait for the next opportunity and remember that opportunities will be there tomorrow.
Conclusion
A lot of people who have never traded before can have a lot of trouble learning and applying the techniques of day trading, but there are some very easy mistakes that people make which can lead to losing all of their hard earned money. Avoiding these mistakes can be difficult, especially when you are first starting out, but it is very important to learn to apply the principles of trading. It is very easy to make the same mistakes over and over, which can cost you all of your money.