Sometimes it seems that there is nothing difficult in trading, it is enough to choose a pair of your favorite instruments, leverage and click the “sell” or “buy” buttons. However, it is not that easy! Here we go with 6 typical mistakes that await fresh trader:
Mistake №1: Buy Low - Sell High
In retrospect, the charts clearly show the best times to enter and exit a trade. But the reality turns out to be not so simple. What at first glance seems like a good time to reverse, very often turns out to be a small stop in a trend.
Our piece of advice: Oscillators available in trading platforms are designed to determine entry points. This type of indicator helps to assess the strength of the current price trend.
Mistake №2: Failure to admit a mistake
This common mistake is associated with being too confident in their assessments of the situation. The market is changing, new important circumstances appear, but it seems to beginners that they only need to sit out the loss a little and then there will be a reward.
Our piece of advice: Constantly analyze the market and the situation. Even the largest investment banks and international organizations are changing their forecasts. There is nothing wrong with that: the world is still difficult to predict, as it was during the crisis. Probably, it has always been this way, it is just that now they talk about it more often.
Mistake №3: No any trading plan
The lack of a clear trading plan for traders at the beginning of their journey is due to inexperience: a person simply has not yet decided what is important and what is not. However, more experienced traders make the same mistake, justifying themselves with the desire to remain flexible in the transaction.
Our piece of advice: Set yourself firm parameters for entering and exiting a trade, and follow them as firmly as possible. It is permissible to deviate from the plan only during periods of increased market volatility in order to close a position and reduce trading risks. In the long run, this tactic bears good fruit, although at first glance it looks overly cautious.
Mistake №4: Overconfidence in a Trading Strategy
The downside of a good trading strategy is being overconfident in it. After a trader has tested it on very long historical data and, moreover, it has been successfully working for several months, it is rather difficult to critically look at its shortcomings. At first glance, a series of losses seems to be just a black stripe that is about to end.
Our piece of advice: Always remember that the market may change: the economy may enter another phase of the macroeconomic cycle, policy or other economic conditions may change. Strategies should be periodically reviewed for relevance.
Mistake №5: Emotions
Emotions are an integral part of trading. They bring healthy excitement and competitiveness. But emotions have another side - the trader becomes euphoric with a profit, and discouraged with losses.
It is not for nothing that the legendary Jesse Livermore wrote: "Human nature is the greatest enemy of any investor or speculator." The psychological swing makes it difficult to make the right decisions. Fear and greed lead to mistakes.
Our piece of advice: Set up goals for the day and a well-developed strategy. They allow you to reduce the level of emotions in trading and minimize the number of rash actions.
Mistake №6: Excessive Trust in Independent Analysts
Forex trading is not an easy task. If the advice of analysts really did deliver great results, then everyone has been making millions in the foreign exchange market for a long time.
It is best to open trades based on your own forecast and opinion. Pay attention to analytical materials and reviews, however, this do it solely to collect information and draw conclusions by yourself. This is how a trader gains a unique and invaluable trading experience.
Conclusion: Trade Responsibly!
You must be fully aware of whether you can afford to accept the risk of losing funds.