Learning is a continuous process. Completing the textbooks is the warm-up step to learning. Real learning happens in the real world when you experience it.
The same notion applies to – Trading. The more you do it, the more mistakes you make and the more your knowledge grows.
However, at times, it becomes quite uncomfortable to bear the pain of trade losses in order to discover new trading lessons.
Well, there is good news for you. In this article, you will have a glance through the five most common mistakes that every beginner traders commit. So, with some investment in time and energy, you will learn ten new trading lessons.
So, let’s get started:
#1 Risk all, Lose all
Never put all your eggs in one basket. The higher probability says that you might end up, having not even get a single egg. For instance, in trading, suppose you are pretty confident over a potential trade and you are about to put in all your money in that trade. Stop there!
Never do that. Most of the bad experiences come unsaid. So, be prepared for that. Keep some firepower with you. Because, in case, if the trades go against you then at least you have some money in hand to win from the opposite trend.
#2 Even if you are 100% sure, then too, trade with a Stoploss
Every trade must be entailed with a stop loss irrespective of your assurance. A stop loss is the best thing that triggers the auto-exit of your trade if it starts acting against your strategy.
(Additional Tip: Most beginner traders must read this stock market basics manual which contains FAQs to better understand basics.)
Hence, if you have a stop loss, you can be at least be sure that a large portion of our investment is safeguarded each time. Or, you might end up losing all your money in one go.
#3 Adding more positions on a Losing Day
If it’s your bad day, try your luck lesser. Never go more than what you can actually handle. Most traders have one thing in common that they keep on adding more positions even if they are losing.
Listen carefully. On one fine day, if you are losing multiple trades and your strategy isn’t working well, then better relax and take a break that day. Go play with your kids or just for a short out trip on that day.
#4 Maintain a Trading Journal
Discipline is one of the indisputable parts of your success journey. You must instill strong discipline traits in you to become triumphant in every aspect of life.
In trading, you must maintain a Trading Journal where you will jot down all your trade entries, exits, profits/losses and the date of your trading. Once you have the data ready, do a self-analysis and know about your weak areas. Start working on that and avoid them the next time.
#5 Avoid Big Positions, Try to Trade in Small Packets
Humans tend to look for more profits and expect huge returns in a shorter time. However, that’s the case, when you are an amateur human. Try to control your emotions, particularly greediness. And, at times, even if the trading pattern is unclear, you just ignore the key technical indicators that are showing you caveat signs, you simply put in bulk trades. These happen mostly with young traders/investors. For them, do check out – 4 Quick Tips for Young Investors
One-shot missed, it’s done! You lose all. Better understand that – Trading is all about strategizing with the erratic probabilities; Keep your tools ready always. Enter small, get small profits, be happy.