Trading involves knowledge, skills, discipline and many other elements that will make the difference between profits and losses. In this article, we’ll focus on the top 5 trading mistakes to avoid at all costs!
1. Trading When Unprepared
Unline many people think, trading is definitely not gambling and you need to get into it with some serious preparations first. Understand which markets you want to trade, what is your strategy, which indicators will you use, how much funds you will you dedicate into trading are all questions that need to be answered beforehand. If not, you will let the market control your decisions and that will end badly so take the time to build a strong plan and see how it works out on a demo account before investing your hard-earned cash.
2. Trading When Clueless
This is something that happens very often with beginners. You’re looking at the charts, reading the news and nothing seems to make sense to you yet you feel like you need to do something right here and right now. Trading when you don’t understand where price action is going or what indicators are saying is the best way to make unnecessary mistakes and take on significant losses. Do not in any circumstances buy or sell any assets if you don’t know what’s happening or see profits potential from a rational and technical standpoint.
3. Trading When Overly Confident
On the opposite side, trading when too confident about your abilities will also lead you to make the wrong decisions. If you’ve been on a roll with quite a few trades and made some significant profits, it’s easy to get carried away and keep going. As we know, greed is a very powerful emotion that can take over and push you to make mistakes. Remember that no matter how good you think you are, you are never good enough to win 100% of your trades.
4. Trading When Stressed Out
In order to perform well in anything, you need to be ready for it. Just as an athele needs to be physically prepared before his competition, a trader needs to be mentally fit before his trading session. Trading requires to be in a calm yet alert state of mind. If you find yourself emotionally unbalanced or stressed out, please do not trade as you will definitely make the wrong calls when feeling that way. Just take some time off the computer, relax and come back to it when you’re ready.
5. Trading When Broke
This is another typical mistake that many inexperienced traders and investors make which is to start trading when finding yourself in financial difficulties. The first thing is that being in that state of mind is usually stressful which as we’ve just seen in the previous point is a mistake to avoid at the first place. You should also realise that there are no income guarantees from trading as markets can always surprise you even if you’ve done everything right. So putting that last chunk of money into trading when you can hardly par for your rent is really not a good idea especially if you lose it as your situation will become even worst.