Triple your chances of Success on every trade by knowing the most Common Mistakes made by a New Trader and how to avoid them.
Every Trader can make Money in trading any kind of Market like; Forex, Stocks, Bullion and Commodity, when they overcome these common mistakes and get success in trading.
I have been in trading for 4 years and made these mistakes several times and seen most of the traders are making these mistakes again and again. Avoid these mistakes if you want to succeed in the market and make trading is your life.
1. Trading Without Learning: As I have mentioned in my earlier Posts, “if you have no time to Learn, you don’t have right to Trade. Don’t start trading until you get sufficient knowledge. It is like “going to battle field without weapons”.
- Learn the game of trading with a Coach. Success is all about “trading a winner’s trading game”. Learning those Success Keys from your Mentor. Then success is yours.
2. Not Having a Trade Plan: Most of the traders don’t have a Trade Plan. They play the game blindly and see that loses occur. They don’t know what to do if the trade goes against them or where to exit, it the trade favors them. Because of not having the Trade Plan, profits made in the Demo Trading turn into loses in Live Trading.
- Know why you want to enter a trade,
- Know where you want to enter a trade,
- Know how much money you want to risk in that trade,
- Know where you get out if you are wrong,
- Know where to take your profits if you are right,
- How much time you want to keep your trade.
3. Not using Protective Stop Loss Orders: Don’t enter into any trade without Stop Loss. Some use Stop Loss orders. But when it is reaching, they keep moving their Stop orders further away. If you do so, you have to see big losses.
- According to your Trade Plan and Money Management, predetermine your Risk before entering the Trade and accept the loss if it went wrong.
4. Taking Small Profits and Letting Your Losses Run: This is the most common mistake made by many traders. This is because not having a proper Trade Plan. After one or two loosing trades, trader looses his confidence and exit with small profits. In the other hand, when price moves against you, you will run the loosing trade for ever hoping that the price will move your way very shortly. If you don’t follow Money Management principles, this may wipe your account.
- Be confident on your System and follow the Trade Plan strictly.
5. Averaging The Looses: This is another most common mistake made by the new traders. If you are in the Buying position but it went wrong and price moves down. You think that this may be the lowest price and add another position to justify the previous trade. As price moves down again, you get “Panic” and increase the lot size by hoping even if there is a move towards your orders, you will come to break-even. But this approach may ruin your whole account. Be careful.
- Respect the market and stick to your trade Plan and exit with small loss or with profits.
6. Over Trading: Don’t sit in front of Computer whole day and trade continuously even if there are no opportunities. Entering in too many Contracts in one time or risking account by taking large trades also leads to bigger losses.
- According to your Trade Plan and Money Management, enter 2 or 3 trades at one time when you find right opportunities. If you stick with Single Trade Plan, it is the best.
7. Bad Money Management: Using too much leverage leads to disaster. Brokers provide 50:1 to 500:1 and some provide 1000:1 percent leverage also. Don’t use large leverage by expecting big profits with small price movements also. If it goes the other way, it takes only few Pips to close your account.
- According to your System, risk only 1 to 2% of your,equity. Even if you are too confident on the Trade Setup, never and never take more than 5% risk on your equity.
- If you enter 2 or 3 trades, distribute the risk equally and take small trades.
8. Depending Too much on Software: Some traders blindly believe Indicators & Expert Advisers and try their fortune without using their own knowledge. They are designed with some calculations. If the price moves differently, they can not catch the movement and give you wrong signals, especially those Expert Advisers.
- Indicator is a “Piece of Software, which provides the current information on Screen”.
- Analyse those Signals with your own Skills by using Patterns, Support & Resistance Levels, Break Outs, etc.
- If you find the Signal right by your own analysis, then only enter the trade. Or else simply ignore the Signal.
If you over come the above mistakes, certainly, you will become a Successful Trader.