Making mistakes that is how you grow.
What are you currently good at? Are you a good swimmer? Are you good at acting or singing? Are you a good footballer? Are you a good reader? Are you good in managing money?
Think of how good you are in something and think back on how you started.
Your first trial was probably a flop. You were not as good as the way you are now.
But what kept you going is the interest and the desire to keep on trying.
Now, you are reading this article because you are probably struggling as a trader. You feel you are not doing something right. That’s okay, you know why?
Reading this article proves you are tired of flopping and you have the desire to become better in trading the financial markets.
Below, I have outlined the backbone of mistakes you should not be making if you want to become a better and profitable trader.
Take note of them and counter them.
Here are 6 mistakes traders usually make trading the financial markets.
- Improper analysis and research
This mistake is common amongst beginner traders. Improper analysis and minimal research can hurt your trading account. I did make this mistake myself. I didn’t know how to analyze charts properly.
I made trading decisions solely on sizes and colors of candlesticks. As I practiced, I improved till I was able to make proper market analysis and profit.
- No trading plan
If you are to build a house and you don’t have a plan or your plan is not well detailed or calculated to carry out the construction to finishing. I doubt you will be successful in handling the project to finishing.
So as it is in trading. If you don’t have a proven and tested out trading plan. You will loose all your money in the long run.
Brokers offer leverage to traders which gives the trader an opportunity to increase the size of his trade position. Leverage is often referred to as a doubled edge sword because it can make you profit big and also lose big.
So it is very important to be careful with the use of leverage when trading. To avoid over-leveraging you need to do proper position sizing before you open any trade.
- Bad risk to reward ratio
Can you stake a bet with $10 to win $10. I don’t think you can. Rather staking $10 to win $20 and above is good. Before you open a trade aim for a risk to reward ratio of 1:2 or 1:3. The idea is that the reward should be more than two times the risk.
- Neglecting a stop loss
The most important requirement in managing your risk when trading is a stop loss. Traders have blown there trading account neglecting the importance of a stop loss. A stop loss is used to protect a trader from further losses. Think of it as the cost of doing business.
- No trading journal
Nobody becomes an expert in a day. As you trade there is room for improvement. A good way to work on your trading and improve is by reviewing your old trades and find out what you did right or wrong. What made you win and what made you lose. You should record your trades. What you bought or sold. What time you traded it. What was the risk metrics like.