Trading Mistakes to avoid – For New and Inexperienced Traders
Due to low entry barriers, trading is a profession where you can start very quickly and easily by simply opening a trading account and as quickly you can start making trading mistakes which would depreciate your capital in a very short span of time.
There are no qualifications or examinations required to start trading and compete in the markets against experienced and professional traders.
Due to this, 95% of new or inexperienced traders would lose their capital to the remaining 5% of the experienced and disciplined traders based on the trading mistakes made by the majority traders.
Here are some of the trading mistakes you should avoid:
Avoid holding to your positions after the market has proven your trading opinion wrong. Do not hold on with the expectation that the market would somehow go in your favour If you do not have any pre defined stop loss, small losses would quickly escalates into bigger losses.
Avoid averaging a losing trade. It would only make your loss potential bigger and bigger. Big trades are the biggest causes of unprofitable trading.
Avoid adjusting your initial stop loss when wrong about a trade. Do not convert your position to hold and hope for a pull back to your original position price.
Avoid trading without a proper plan and strategy. Do proper homework for a higher probability to success.
Avoid trading very big position size just because you are sure that the trade will go as per your analysis. There is no guarantee that the particular trade you enter, no matter how confident you are about it would go 100% in your favour. Keep your trade size small and consistent.
Avoid trading without proper knowledge of trading terminologies. Trading that are not fully understood would certainly end badly at all times.
Avoid shorting in a bull market and selling new all time highs short.
Avoid buying in a bear market. Don’t try to catch the falling knife.
Avoid buying far out of the money options. They have terrible odds of making money.
Avoid risking large amount of money to make a small amount of money.
What are your views on mistakes to avoid? Share your comments below!