The 10 Trading Mistakes To Avoid In Order To Be Great

Trading mistakes are something that everyone makes from time to time. No one is perfect, and trading is never a sure thing; if it was, everyone would be doing it. However, there are 10 specific trading mistakes that newcomers often make that can put them off trading for life if they continue to make them. By staying away from these mistakes and working more successfully, you can be a great trader much more quickly. Check out the following professional trading tips – all lessons learned from those in the trenches.

Over-Trading

Almost every beginner trader – as well as many more established traders – over-trade, and it is this that causes them to give up before they even really get started. Trading too much can be tempting, but it is one of those trading mistakes that is hard to rectify and harder to make good on once you have done it for a long time.

Ideally, you should only be in one trade at a time. This way you can focus your efforts on it and pay attention to what is happening. By being in too many trades at once you can easily lose sight of one or more of them, and not notice if something changes and you need to act.

The problem is that most traders want to be in a trade at all times. They ignore what their charts are telling them and go on to make fundamental trading mistakes because they make up reasons (which just don’t stand up to scrutiny) about why they should be trading. They are looking for – and seeing! – signals that don’t exist and trading anyway.

This is a big error. It’s better not to be trading at all if the signals aren’t pointing you in that direction, and there is no shame in not trading; in fact, sometimes it’s the not trading that makes you more successful than trading every waking (and sleeping) moment.

So how to get out of this mindset that says you should always be trading, even when it doesn’t make sense to? Start to making sure you are only ever in one trade at a time. When you do this, you will want it to be the best trade possible, so you’ll be checking your charts until it is.

Over-Thinking

If you are thinking about trading all the time, you are thinking about trading far too much and you will make trading mistakes. You will keep going over and over decisions you have made and the more you think about them, the more likely you are to ‘fiddle’ with the trade that came from those decisions. The more you do that, the less likely you are to be successful.

Or, because you are thinking about trading so much, when you’re not trading you might convince yourself that you should be, and then make a trade that in normal circumstances you would never have gone near. When you do this, the likelihood is you’ll lose money.

A good idea is to use a ‘set and forget’ formula. When you do this, you are confident in your charts, and you will have a stop point in place as well. This should mean you can trade without worrying, and without the need to stare at the markets all day. Of course, this is not something everyone is comfortable doing, especially when they are just starting their trading journey. If this is the case for you, try to schedule in some time away from the markets so that you do get some down time and you aren’t completely immersed in the process.

Using Short Time Frame Charts To Make Trading Decisions

Day trading is one of the trading mistakes that traders make the most often. Day trading is very often the first thing that new traders hear about – it’s a phrase that is bandied around regularly. This means they may believe this to be the only way to trade, and so they begin on the wrong path. This path leads to over-trading, and to gambling on trades as well.

Although there is nothing wrong with day trading and shorter time frames when you are more established and understand trading more, when you do it at the start it can give you the wrong impression of trading, and you can lose a lot of money. It makes sense instead to look at the higher time frames – there is much more information to be found there and the more information you have the better decisions you can make. Move on to lower time frames when you are more confident.

Not Using A Demo Account

A demo account is a truly useful tool for any trader, and using one before you spend real money is crucial. You can see how it feels to trade without losing anything, and you can make all your trading mistakes on the demo account before you move onto the real thing. This will save you a lot of loss and could even save your trading career.

By heading straight to a live account, traders don’t have the ‘safety net’ that they would if they used a demo account. They are immediately in the thick of trading, and they may not have any idea what they are doing. They take risks and make errors and could lose everything.

News Distractions

Trading mistakes don’t have to be to do with the markets and the trades; the news is an issue as well. Traders can find they are caught up in the news and they become distracted by it, which has the knock-on effect of helping them to lose all their money.

When you start to look for reasons to make a trade and you turn to the news to do it, you will be able to find your excuse to go ahead, even if your charts say no. The more you look, the more ‘reasons’ you will find, but as with everything on the internet, you can find anything if you look hard enough.

Leave the news alone and stick with your trading charts. You won’t get caught up in something that really has no relevance for you, and your trades will be much more successful.

Not Seeing That Trades Are Random

It’s good to be confident in your charts and to expect to do well, but one of the biggest trading mistakes that traders make is to believe that their chart will steer them clear of any problems. The trust is that all trades are random. We can do our best to determine the outcome, and the best trader are right more than they are wrong, but they are still wrong sometimes – they still lose money. That’s because trades are random and can change at any time.

Understanding this fact and therefore not risking everything on one trade (or even a number of trades) even if it looks ideal is important. It’s better to use just a small percentage of your account no matter how perfect the trade set up is. Over time you will make a lot of money and when you lose you won’t lose it all.

Being Desperate to Trade

Trading can be enjoyable, and it makes sense that traders want to do it. However, being desperate to trade can lead to all kinds of trouble and trading mistakes. Or perhaps you made a big loss and now you want to trade to make back that money and then some. Any trade that is made when you are feeling this way is likely to be littered with issues because you will make excuses as to why it should work, even if the signs are that it won’t.

Trading should never be your only source of income. It is far too unstable and far too unpredictable for that. To make some extra money because you are not risking a lot it is a great thing to do, but to risk everything you have is never worth trying.

Not Trusting Your Decisions

Terrible trading mistakes can come from not trusting your own decisions after you have made them. You can change your trades due to feeling like this, and you can stop trades before they have had a chance to make you any money. You might even let a trade continue for longer than it should, and lose it all in the process.

When you made your choice to trade, you should have made it with all the facts at your disposal. Therefore, what is the point in double-checking, even triple-checking, what you decided? If you have done your research and put the foundations of trading in place, this should never need to happen and you should be able to trust what you are doing every time.

Focusing On The Money

Yes, trading is a way to make money, but it is not a get rich quick scheme and it is not something that can or should take over from your day job. By focusing too much on the money aspect, you will find that you make trading mistakes because you over-trade or don’t trust your decisions. In the quest to keep making more and more money on bigger, riskier trades, you might find that you lose everything instead.

Focus on the process of trading rather than the result. This way you will get much better much more quickly, and the results will come anyway.

Not Knowing Your Risk Allowance

How much can you risk on each trade? If you don’t know, you should find out. Make a budget sheet to help you determine just how much you can spend – or, to put it another way, how much you can afford to lose – on each trade. As time goes on and you are more successful you can gradually increase this amount by a small percentage.

Not knowing how much you can risk on each trade is dangerous. You might spend far too much and then have financial issues if the trade fails.