Making money by trading on the exchange is a long-term process that requires constant improvement of both the trader oneself and their trading system. Moreover, each trader in the process of their formation (and at the professional stage too) goes through a certain series of mistakes. They either learn from mistakes or repeat them again – until they identify these mistakes and learn to avoid them. And as a result, they not only get profit but also turn trading into a category of truly creative activities.
Let’s analyse the main categories of mistakes.
1. Technical Errors
The simplest group of trader’s mistakes to fix. Naturally, at the beginning of the trading path, a novice trader has little knowledge and experience, stock charts seem too confusing for them. It seems that they give practically no clues about possible variations in the further development of the situation. In such conditions, a trader can make a number of mistakes.
2. Psychological Mistakes
A group of mistakes that are difficult to correct, but mastering your own emotions is a mandatory step through which any trader must go. There are only three options for the development of price movement: sideways, up, and down, and all trade on equal terms. The question arises – why do many people lose money there? And often the answer lies precisely in the psychological aspects: trading is in many ways counter psychological, therefore, one’s own psychological attitudes, developed over the centuries of evolution, have to be slightly changed.
Probably the most common mistake of this group is tilt – random chaotic execution of transactions, when a trader loses their “sense of reality” and begins to enter into absolutely unplanned transactions, being in a stressful state. Situations of this kind are described in detail in sports medicine. A tilt usually occurs after a losing trade (or a series of them), and after that, a trader often loses their sense of self-control.
How to avoid this most important mistake of a beginner trader? First of all, do not let the tilt show up. This is facilitated by a five-minute pause after the unprofitable trade, in which you need to plan and, what is essential, write down on paper the next situation to conduct a trade, and then wait for it to appear. If there is a situation, there will be a deal, if there is no situation, there will be no deal.
It is also necessary to have enough information and knowledge to act reasonably in stressful situations. On the Forextime blog by the https://www.forextime.com link, you can find all the necessary information, articles, and news that will help you in Forex trading and guide you if you feel lost. You can access it from Nigeria and try it right now!
3. Trading System Errors
From the moment a trader begins to make the first trading transactions, they begin to build their own trading system. At some point, the trader realizes that the rules for making and holding transactions have become formalized, and the system has received a complete logical form. This makes the trader jubilant and they start thinking that things will be different from now on. And this is another simple mistake that all (or almost all) traders make.
The fact is that everything just begins with building a system. The inability to adjust your system in accordance with constantly changing market conditions is a really serious problem. Markets are volatile and what works now may stop working in a year. But these changes are often smooth and are summed up from changes in macro parameters – volatility and trading volumes, the focus of market attention, basic correlations, and so on.
The exchange practice knew many examples when people received a trading system, but, not being able to analyze what was happening, often rendered it unusable. Soon these traders were leaving the market instead of gradually tightening the screws on their trading system.
4. Risk and Money Management Errors
These are no less common mistakes of a trader in stock trading, which are crucial to correct. Even having a profitable trading system and controlling their emotions, a trader can lose money if they make mistakes of the group described – for example, use extremely big leverage.
This group includes errors caused by the inability to distribute capital and manage it competently and a lack of understanding of the nature of risk controllability. The most common mistakes in this group include averaging and making huge deals. Thus, when in a losing position, traders often feel like adding more to the losing position based on the feeling that the price has already passed enough and is ready to reverse in the opposite direction.