It is possible to point out various mistakes when trading. This is especially likely when you have some experience. If you are a beginner though, identifying the mistakes could be a challenge. In a market where the leverage is easily accessible to traders, the chances of making mistakes are even much higher. There are many mistakes that traders make in the attempt to beat the market.
Anyone who wants to succeed must take their time to identify them in order to navigate the market with ease. Since it is not possible to outline every single mistake, we will look at the top 5 trading mistakes which you are likely to make and which you should avoid in 2018.
1. Rushing to the market after major headlines
Almost everyone in the trading business keeps an eye on the current news. In fact, all skilled traders always ensure that they are up to date with what is happening in the markets. Staying informed is indeed an expert move that can allow you to trade better and take up new opportunities. It does not mean that you should rush to invest every time there is a major headline though. Not all news is good for predicting how the markets could go. In fact, it is always recommended to start by analyzing data before making moves based on news. News can offer a reliable source of market information but charts and analysis tool are the ultimate options for giving context to market headlines.
2. Averaging down when trading forex
One of the most common mistakes that forex traders make is averaging down. A lot of traders think that the few decimal points after figures do not count for much. This habit is however destructive and can lead to huge losses. For a start, when you average down your trades, you leave yourself in a vulnerable position where you must go up. Since the market is unpredictable, however, you could end up losing the money from the initial losing position that you choose and also lose money from the market trend. It is important therefore to keep the losing margins as small as possible even if it means defining your trade to the last coin.
3. Risking more capital than you are supposed to
It is important to know that excessive investing will not always lead to huge returns. No matter how good your chances might be, you will have that one trade which will spoil it for the others. You should not let that trade catch you by surprise. The longheld tradition in the world of trade is that investments should not exceed 1% of total capital. This is more so when several trades are being done on a particular trading day. When you stick to low-risk investments, you can be sure of lasting in the trading business for a prolonged time.
4. Having outrageous expectations
Being unrealistic when trading is common to most traders. This is because everyone has expectations about the market and these expectations are always positive. The market, however, operates under its own rules which are averse to the opinions of traders. The market is volatile, unpredictable and always dynamic. It is thus important to have a consistent plan which is based on data and which will not change regardless of the status of the market. A plan brings steadiness and sanity to a market that is otherwise errant. Recognizing these facts about the market can help a trader have more realistic expectations.
5. Failing to keep personal records
Traders who want to access historical information about the market can always refer to blogs, data charts, public records and many other sources. Historical market data is the best tool for creating winning strategies. Personal historical data is especially great for narrowing down the strategy to a few proven approaches. Many beginners fail to realize how important personal data is and they end up repeating the same mistakes for a long time. This results in losses that could otherwise be avoided.
Most traders suffer because they repeat some common mistakes for a long time either knowingly or unknowingly. Traders fail to achieve their goals because they expect too much from the market, fail to keep records or simply risk more than they are supposed to. Avoiding the above mistakes will highly reduce your losses in 2018.