In this article you will find 10 mistakes of a beginner trader that are repeated frequently. In fact, these mistakes are usually committed by any trader, from beginners to experts. No matter how long time you do
have on the market; Occasionally there will be periods of indiscipline, either due to extreme market conditions or emotional factors. It is vital to know how to recognize and understand these situations in order to succeed in trading.
1. A Beginner Trader Cut the profits and let losses grow
By far the most common mistake when it comes to investing in Forex is to maintain losing positions open for long time and close those winning positions too early (out of fear). Even if you have a higher record of winning positions, the losers, though less, will represent a greater amount of money. The key of limiting losses is to follow a strategy which considers risks and always use a stop-loss. No one will be right all the time. The sooner you accept that having small losses is part of the day by day, the longer you will have to refocus and create winning operations.
2. A Beginner Trader Trade without a strategy
Opening a position without a specific strategy is an invitation to the market to take our money. If the price moves against the position and you don’t have a strategy, you won’t know for sure when to cut losses. If the price moves in our favour, you won’t know when to collect the winnings. Making these decisions in the heat of having open positions is a good invitation to disaster. One of these 10 mistakes of a beginner trader should avoid isTrading without a strategy because this perhaps is the most important step a Forex trader can make, as he or she tries to largely eliminate the emotional in the right timing when making trading decisions.
3. Trade without a stop-loss
Trade without a stop-loss is also a recipe for disaster. This is how a small and manageable loss can end up blowing up a whole account. Using a stop-loss is a vital part of a well developed strategy that has specific and realistic expectations based on previous analysis and research. Stop-loss indicates when a given strategy is invalidated.
4. Move a stop-loss
Moving the stop-loss to avoid being taken out of a position is almost the same thing to invest without a stop-loss at all. It indicates that there is a lack of vital discipline, which will unequivocally result in losses in most cases. An exception to the rule that allows you to move a stop-loss, is when it is done in the winning direction, to consolidate benefits that are being registered in the position. Never move a stop-loss in the losing direction.
5. Beginner Trader Always Over-invest
There are two forms of over-investment. – Investing too often on the market: investing too often suggests that something is always happening on the market and that you always know what is happening. If you have long time open positions, you are also constantly exposed to market risks. It is better to focus on looking for optimal and strong opportunities, where the risk is less and where a well developed strategy can be applied.
– In the 10 mistakes of a beginner trader we can see they Keep many open positions simultaneously: too many open positions at the same time is an indicator that you probably don’t have a good strategy and many of them are being opened instinctively without any control. Too many open positions also affect the available margin, making maneuvers more difficult in difficult market situations.
6. Beginner Trader uses Too High Leverage
A Leverage Too High refers to maintaining very large positions with respect to the available margin. Even a small market movement can be catastrophic for the available margin in a very big position. This common mistake becomes more tempting because of the generous leverage levels offered by some brokers. If a broker offers leverage of 1:100, 1:200 or even 1:500, this does not mean that they should be used. Never open positions based on the maximum leverage available. Positions should be based on specific factors in the trade, such as proximity to specific technical levels or confidence in a specific signal to open a position.
7. Not Adjusting to Changing Market Conditions
Market conditions are always changing, which means strategies to be used must be flexible. The current market situation should always be analyzed using technical analysis to determine whether it is fluctuating or is in a trend. The use of technical indicators must also be flexible. No indicator works well all the time. Different indicators and strategies should be used depending on market conditions. Some indicators work well in fluctuating markets, and others work better in markets with more pronounced tendencies.
8. A Beginner Trader is Not Aware of the importance of News and Events
Even for those traders who rely solely on technical analysis for their trade, it is paramount to be aware of the main news and events of the market. If at some point certain indicators are showing existence of a very good opportunity to open an position, but in half an hour an important news is expected which can move the market significantly, it would be imprudent and very dangerous to open that position. This type of situation might happen if you are not aware of events and economical news. Always keep the economic calendar handy and seek to identify those events that are more important than you can affect your open positions.
9. Beginner Trader Invest Defensively
No Trader Wins All the Time. Some of the best traders even lose more times than what they win. But when they lose, they lose few. After a series of losses, it is better to wait for a while for the market situation to normalize and refocus on new opportunities. Avoid falling into the mistake of Defensively Invest or investing on the defensive and try to recover or avenge the losses.
10. Beginner Trader Have Unrealistic Expectations
No one is going to retire with the result of a single position. The key is to make gains as you gain experience. It must be flexible and manage to accommodate market conditions. It’s a bad idea to have at a start goals about how much money you will earn. By having expectations about specific quantities, and being in a position where those expectations have not been achieved, it is very common to fall into the temptation of opening bigger positions to achieve the goal. In the end, the result will be a major loss.