7-Great Mistakes Made by Some Novice Traders: Trading is complicated and there are many traders who can commit as a trader. Let’s take a look at the 7 most popular mistakes that novice traders make and how to avoid them. Read the full article to learn more.
Risking what you can’t afford to lose
Operating is a high-risk afternoon. From time to time, every trader loses money by trading. Risks must be managed and that which cannot be afforded to lose must never be put in jeopardy. There is a big difference between being positive and being presumptuous and unrealistic. When traders watch their losses and consider them an essential part of trading practice, they are less prone to erratic behavior. When, on the other hand, you believe in luck and anticipate a certain victory, you are more likely to be taking more risk than you think.
All at once
Indisputably, the easiest way to lose all your money is to invest it all at once. Trading is not a casino, and luck should not be an integral part of your trading strategy. Every time you go with everything you risk losing everything. No trader is able to hit all his trades. Sooner or later you will fail a trade and with it all your capital. No matter how much you’ve earned so far, you’ll have to start from scratch.
Trade in the wrong time period
Operating with fundamental reports on a 5-minute chart can be damaging. But why? Fundamental factors can take years to deploy. Inflation, GDP growth rate, and major political announcements have much less use in a 5-minute interval than, say, a 1-hour time interval. In this case, too, timing is of paramount importance. If you are a faster or slower minute of the count, you are going to miss the opportunity and leave money in the process.
Operate without a solid plan
Many traders use their emotions as a guide, following the so-called intuitive approach. But only a few make money out of it. The thing is, you are constantly tempted to blindly believe in luck and fortune when trading. You can fall into the trap of confusing it with a hunch (though it’s just your desire to win). Trading is not gambling; this approach may work once or twice but in the end it always fails.
Trading without a stop-loss
Stop-loss is often a feature that is overlooked, although it can help any trader better control their losses. According to industry specialists, you must learn how to lose money (the right way) before you learn how to earn it. Stop-loss is, as its name suggests, an automatic closing of positions when a certain limit is reached. Therefore, it can greatly help you to improve your overall trading efficiency.
Changing your strategy too often
It’s no secret that when one trading strategy stops working for you, you have to go ahead and choose another. Even so, the question ‘How to define strategies? remains. Some people believe that a strategy that fails, say 5 times in a row, should not be taken seriously. But in reality, all traders suffer a losing streak sooner or later, and even a prominent strategy can show mediocre results.
Trading with correlative assets
This point is not so obvious (and that is why it is so dangerous). Most traders know that it’s a good idea to diversify risks, buy and sell different assets instead of just one. What some forget is that some assets may look different but they can be closely related. Let’s say the EUR/USD and the USD/JPY, they will behave similarly when the USD rises and the EUR and JPY stay at the same level. When trying to diversify, you should therefore look for truly independent assets.