There are a few common mistakes that most traders do. New traders start trading without thoroughly researching what works and what doesn’t. Many of these concepts will be familiar to all new traders. To break these bad habits, some of us had to fight our natural instincts.
A List of Common Mistakes New Traders Do
- In a bull market, being a tenacious bear. Continuing to sell short inside a strong upswing not only results in a loss of capital as the market rises to new highs. You also miss out on the simple profits that may be realized by simply holding positions or purchasing the dips.
- In a down market, being a tenacious bull. Some markets are over sold and continue to make lower lows. If support fails to hold. A stop loss must be used to exit a downtrend.
- Putting your entire trading account at risk in a single trade. You should never put your entire trading account and career at jeopardy on a single trade. Trading in small increments ensures that each trade is only one of the next one hundred, rather than putting your entire future on the line. This is a horrible financial and emotional decision. It’s also a sign of arrogance to think you can foresee a future that doesn’t exist.
- You can’t even overcome commission expenses if you’re trading with a little account. If you start trading with a little account, your chances of success are slim. You must have sufficient capital to manage risk across several positions, and commission charges should account for such a small percentage of your trading capital that they are irrelevant.
- Instead of trading the chart activity, you can trade your thoughts. The market is unconcerned about your viewpoint. I analyzed successful traders who traded using proven systematic techniques rather than subjective judgments.
- Consider that some trading guru has a crystal ball and blindly trust their market predictions is another common mistake of new traders. Nobody can predict what the stock market will do next. To gain money, you must observe actual price patterns rather than rely on prophetic predictions.
- Continue to make the same types of bad losing trades and expect profitable results. All trades must be executed within a quantitative system that has been backtested for profitability in the past.
- Rather than trading systematically, rading randomly is another mistake. A trade performed outside of an established framework is by definition random. All trades should be accompanied by repeatable signals.
- Trading without a competitive advantage. You should not be trading if you don’t know what your edge is that will make you money.
- Consider trading to be a simple way to make money is another common mistake. Trading is the most difficult and time-consuming way to gain money. We need a lot of hard work to be a trader.
- Allow our emotions to run our trades is another common mistakes. You must trade as if you were a professional businessperson rather than an emotional gambler.
- Assess their capacity to be a profitable trader in a single market scenario. To lock in bull market profits and trading signals for all market conditions, you’ll need a strategy.
We should avoid these mistakes and try to master the trading strategy on paper trading. While starting a career in trading the money should be the last outcome in our focus.
Read this article Don’t Focus on the Money, Focus on the Trading for more details.