We have repeatedly talked about what to do to become a good trader and what are the precautions that a beginner trader must follow to move towards a position of professional.
After talking about what needs to be done, it is important to analyze also what not to do. Every trader has committed mistakes in his ‘trading life’, even professionals, but there are things to avoid absolutely if you want to close a winning position or continue to trade without being seriously hurt.
Here the list of the common trading mistakes in trading.
- LACK OF TRADING/DISCIPLINE
A trader must have discipline and a strong resistance to stress, because it is not easy to keep a cool head and the necessary detachment in critical situations. It is important to have a detailed trading plan to follow during the trading session. Trading is like business so you cannot win without all the analysis.
- DO NOT HAVE A CHECKLIST INVESTMENT
Have a checklist that will indicate what to do during an investment can greatly increase every performance. A checklist can keep you away from investment that does not correspond to your criteria ensuring a significant increase in the discipline.
- FOLLOWING THE ADVICE OF STRANGERS
Never make investments on the basis of opinions, tweets or promises made by other people. Base your trading on your instinct and preparation. It is impossible to predict where prices will go in the future. There will always be traders, economists and so-called trading gurus and a group of people convinced to be right. Do not follow those who maybe were just lucky.
- ABSENCE OF EXPERTISE
To be a successful trader, you must operate on a small number of markets, focusing on them and monitoring them. After choosing the markets to operate on, traders must know as much information as they can. You must then choose a few tools and strategies with which to operate and learn to use them very well. And then, it is important to follow the rules of the trading system or method of operation that it was decided to adopt.
- NOT BEING ABLE TO ADAPT TO MARKET CHANGES
Once you have found a way to make money on an ongoing basis, it does not means that the work is over. Financial markets are very volatile and they evolve constantly. If you cannot adapt to these changes, you’ll find yourself quickly out of contention.
- DO NOT MAKE A POST-TRADING ANALYSIS
What to do after the end of a trading session determines your success as a trader. The professional traders analyze their investments, data and planning sessions for the following days.
- TRADING DURING THE FIRST AND THE LAST HOUR OF THE SESSION
The opening and the closing phases of the market are absolutely the most difficult and dangerous. Beginners have to avoid these hours. Trading in these parts of the session is difficult also for professionals because it requires considerable experience and a deep knowledge of the financial markets.
- IGNORE THE IMPORTANCE OF THE SPREAD
The spread is the cost of doing business as a trader and then, it is a way to minimize costs. Always keep in mind how much is the spread.
- EXPECTING TO GET RICH SOON
The trading industry creates the illusion that the right strategy can make you make money faster. However, even after years of bad investments, and after losing money month after month, traders are still not convinced that they have become millionaires because they have found the right strategy.
- TRADER IS NOT OMNIPOTENT
After a series of winning positions, traders may be subject to a kind of sense of omnipotence. At that point, even if the losses begin to exceed the winnings, their confidence is not much affected, and trade can massively increase only to make up for the losses. It is in this moment that the trader must have the intelligence to stop and do a critical analysis of his work.
This list is not exhaustive but it will certainly help to identify the most commons mistakes in trading. Keep in mind that for each mistake there are a lot of related errors.