Trading in the financial markets is becoming more popular and accessible which is why many people think it is an easy task. However, it is a job that requires a lot of knowledge and experience. It's like starting any professional job: You have to learn your craft before you can be successful.
All traders will learn through experience, but there are some common mistakes that can be avoided if we are aware of them. As with everything else, many of these errors boil down to overconfidence and lack of preparation. If you are aware of common beginner mistakes, you can take steps to prevent them from undoing mistakes. Here are the four most common mistakes that beginner traders make:
- Trading without a strategy: There are many factors that influence financial market trading, among them your personality and your emotions. If you do not have a well-defined trading strategy, you are likely to fall out of position due to stress, anxiety, excitement and exaggerated euphoria, and make operations that do not stick to the strategy you have designed and planned. Negotiation takes time and effort, even before it begins. You will need to sit down and work on your personality as a client , setting goals and time frames, then creating a plan that fits your personality.
- Do not use stop - loss : levels of stop - loss is necessary if you want to trade another day. Losses are normal when trading, even professional traders have losses. If you don't set stop loss targets, they can pile up until your account equity is completely burned and you have nothing left to work on tomorrow. Make sure you have small losses that you can bear and that you can recover from so that you still have the capital needed to take advantage of other positions that you really want to hold.
- Over-Trading: This is especially difficult for new traders because they are so motivated when they get started. However, over-trading can quickly turn your profits into losses. It is profitable to define your trades carefully and to operate on a wider range of business excessively. In this sense, we can also add the operating error in several markets at the same time. This can cause many distractions that prevent beginners from honing their skills and gaining the experience needed to become successful market traders.
- Allowing losses to continue: It is also difficult to avoid this mistake because it requires a lot of experience to know when to cut losses early and when to allow your trade to reach the stop loss level. Although it is important to define loss levels, sometimes it is important to close a position and thus cut losses before it reaches the stop-loss level. Let's consider situations where, for example, unexpected news or the result of the scheduled data in the economic calendar negatively affects your operation. This is something that cannot be planned, but must be taken into account in every process. It is essential to cut losses quickly and allow profits to flow.