5 Mistakes of New Traders
There is no need to be a beginner to make mistakes while trading in the financial markets. As a fact, a lot of advanced players do errors, when their discipline is not under control, and intuition or feelings come into the game. So do not wonder what these professional traders have that you do not, as the answer is quite straightforward. Novice traders often choose strategies for trading setting priorities upon wrong criteria – emotions, and that brings more damage than good and ends up in the ineffective outcomes.
Occasionally you struggle too much to make money and conquer the market, and because of that desperate and unreasonable will, your mind gets clouded. It would be your biggest mistake to begin your trading experience with this kind of mind-set as it will cause more losses than gains. Before jumping in, make sure you understand and accept the fact that the market can be random, and it is in your benefit to be in a harmony with it.
Control the market, do not make it control you
It will probably sound like a paradox, and it is, but lesser you feel the obligation to trade, the easier you will make profit. Make it clear for yourself to be successful in this business. Some unforced mistakes will occur anyway, like over-trading, stupid trades, over-leveraging and others. This happens, but your goal is to gain logic and discipline in your actions and avoid faults.
You might take it not seriously, but no matter how many video lessons/webinars/blog posts/watch-lists or any other useful tools are checked, far too many newcomers keep making same mistakes that prevent them from upgrading their accounts to the next level. And cutting losses quickly is a top mistake, and this is also a great example when the ego takes control. You refuse to admit when the wrong action was taken, and small losses become emotionally and financially disruptive. To preclude this from happening, remember a rule number one – cut losses quickly. To know more, go through the list of 5 most common mistakes novice traders do and get to know what to avoid when you are about to explore FX markets.
5 most common mistakes
There are five potentially destructive mistakes resulting in lower returns, though knowledge, discipline and an alternative approach will help to avoid making those actions.
No trading plan: experienced traders know their exact entry and exit points, amount of capital to be invested in the trade, and the maximum loss they are willing to take. Novice traders may be unlikely to have a trading strategy in place before they start trading. Even if they have a plan prepared, they are more inclined to abandon it, if things are not going their way.
Pre-Positioning for News: FX Calendar is a very good tool to collect information on what is going on on the market. Though keep in mind, that even if you are fairly confident in what news will move on the market, you can really predict how the market will respond to the expected announcement. Quite often, there are complementary figures or indications provided that can make moves irrationally.
Trading Right after News: wait for volatility of the announced news to become less intense and really develop a definitive trend. By following this advice you will manage your risks more effectively having more stable direction and no liquidity concerns.
Averaging Down: there are several problems connected with averaging down. The main one is that losing position which is being held is a voluntary money and time sacrifice. Remember that a larger return is required on remaining capital to get back your lost one. Averaging down might work occasionally, but mostly it is leading to inevitable losses, as a trend can maintain itself longer than you will stay liquid. Trade opportunities must be realized when they occur, and poor trades must be exited quickly.
Prevaricate from homework: newcomers are often skipping doing their homework or carrying out sufficient research before proceeding to trade. Doing homework is crucial as beginner traders do not usually know seasonal trends, timing of data releases, or trading patterns. The beginner sees urgency to put on a trade, rather than take some time conducting a thorough research. This attitude will result in a quite expensive lesson.
Trading can be very profitable with proper diligence, and as long as the mistakes mentioned above can be avoided. While most of traders are guilty of doing these mistakes from time to time, the novice traders should be especially cautious and not make them. As their potential and capability to get over severe trading failure is likely to be much more confined than with experienced traders.