5 Mistakes of the Novice Trader
01/06/2017 10:43 am EST
In trading, while some unforced mistakes will occur no matter what, Konstantin Rabin of ForexCrunch.com highlights five common novice trading missteps and suggests ways for beginners to try to avoid these-oftentimes costly-errors.
There is no need to be a beginner to make mistakes while trading in the financial markets. As a fact, a lot of advanced players do errors, when their discipline is not under control and intuition-or feelings-come into the game. So do not wonder what these professional traders have that you do not, as the answer is quite straightforward. Novice traders often choose strategies for trading setting priorities upon wrong criteria-emotions-and that brings more damage than good and ends up in the ineffective outcomes.
Occasionally, you struggle too much to make money and conquer the market, and because of that desperate and unreasonable will, your mind gets clouded. It would be your biggest mistake to begin your trading experience with this kind of mindset as it will cause more losses than gains. Before jumping in, make sure you understand and accept the fact that the market can be random and it is in your benefit to be in a harmony with it.
Control the Market, Do Not Make It Control You
It will probably sound like a paradox, and it is, but lesser you feel the obligation to trade, the easier you will make profit. Make it clear for yourself to be successful in this business. Some unforced mistakes will occur anyway, like overtrading, stupid trades, overleveraging, and others. This happens, but your goal is to gain logic and discipline in your actions and avoid faults.
You might not take it seriously, but no matter how many video lessons/webinars/blog posts/watch-lists or any other useful tools are checked, far too many newcomers keep making same mistakes that prevent them from upgrading their accounts to the next level. And cutting losses quickly is a top mistake and this is also a great example when the ego takes control. You refuse to admit when the wrong action was taken and small losses become emotionally and financially disruptive. To preclude this from happening, remember rule number one, cut losses quickly. To know more, go through the list of 5 most common mistakes novice traders do and get to know what to avoid when you are about to explore FX markets.
5 Most Common Mistakes
There are five potentially destructive mistakes resulting in lower returns, though knowledge, discipline, and an alternative approach will help to avoid making those actions.
No Trading Plan: experienced traders know their exact entry and exit points, amount of capital to be invested in the trade, and the maximum loss they are willing to take. Novice traders may be unlikely to have a trading strategy in place before they start trading. Even if they have a plan prepared, they are more inclined to abandon it if things are not going their way.
Pre-positioning for News: FX Calendar is a very good tool to collect information on what is going on on the market. Though keep in mind, that even if you are fairly confident in what news will move on the market, you can't really predict how the market will respond to the expected announcement. Quite often, there are complementary figures or indications provided that can make moves irrationally.
Trading Right After News: wait for volatility of the announced news to become less intense and really develop a definitive trend. By following this advice, you will manage your risks more effectively having more stable direction and no liquidity concerns. To read the entire article, click here...
By Konstantin Rabin, Contributor, ForexCrunch.com