Common Mistakes New Traders Make
Going into futures trading can be a fascinating experience. It becomes more exciting and motivating if you see people doing well in the field and making a lot of money. If trading is something you are considering, it is best to study how successful traders trade, and you also consider their program. Soon, you’ll begin to make some profits.
However, as exciting as trading seems, it can quickly become a nightmare for a person who makes certain mistakes leading to several losses. When that happens, they begin to lose interest, and some might start to see trading as a scam.
If you can avoid these mistakes, you’ll enjoy the good side of trading and see that it’s not a scam. So, what are the mistakes we’re talking about? They include:
Lack Of Preparation
What will you expect when you see an amateur tennis player competing with the likes of Roger Federer on the tennis court? Will you expect the amateur to be Victorious? Of course not. This is the same thing when it comes to trading. Trading is one of the most challenging professions you can think of. A single wrong analysis can make you lose a trade. This is where many new traders get it wrong. They fail to prepare before venturing into the world of trading. They think it’s just as simple as buying and selling. To become a successful trader, you must avoid the rush and instead get yourself prepared well. You can start by trading with a demo account, which is virtual money you can toy with. If you study and practice well on demo and you are convinced you’re competent enough, you can then invest with your real money.
Lack Of Risk Management
Risk management is the key to successful trading. You can’t see a successful trader except that he’s a good risk manager. Many new traders get it all wrong here. They want to get a lot of profits in one single trade. Little do they know that trading is not gambling. It requires intensive analysis and proper risk management. Most new traders can risk all the money in their trading account on one single trade, and if they’re unlucky that the trade doesn’t go their way, they lose all the money. If you risk only 10% of your money in every trade, there’s no way you can blow your account in one single trade. Hence, to become a successful trader, you need to practice proper risk management.
They Follow Rather Than Learn
There’s nothing wrong with having a mentor. It is one of the easiest ways to learn and become a professional trader yourself. However, the problem is when you want to copy or mimic the trading of an experienced trader. Many have blown their account that way. Some even subscribe to signals. So, they’ll be told when to enter a trade and when to leave by a professional. This is a terrible mistake that many new traders make. Instead of wasting your time on copying the trading of a guru, invest your time in learning how to trade yourself. The money is not going anywhere; it is there for you to make any time you’re ready. So, don’t rush in. Successful traders don’t copy signals; they instead learn how it’s done and do it themselves. This is what you should also do to become a successful trader.
Not Cutting Losses
You can never win all your trades. Thus, you must know when to leave the market when you’re losing. Although no one likes to take losses, this is trading, and you can’t avoid it. Many new traders get it wrong here. Because they don’t want to accept their losses, they leave their trading to continue down the trend expecting it to reverse and go their way. That way, a $100 loss can climb up to $200 and gradually to a thousand until their account is blown. This is a terrible mistake you should avoid. Before you enter any trade, analyze the market, and determine how much you are willing to lose. Remember the tips explained above — you should only risk 10% of your trading balance. Thus, if you have $100 in your account, you should only consider losing $10 if the trade doesn’t go as projected.
If you can avoid these common mistakes, you will begin to trade like a professional.