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5 Biggest Mistakes Every Beginner Trader Makes

Nobody likes to make mistakes, but unfortunately no one is perfect and we are subject to make mistakes throughout our lives, but it is how we learn from those mistakes that determines how successful we will be in life. Trading is now different, and you WILL make mistakes and you need to be able to learn from them if you are going to be a successful trader. Below are the 5 biggest mistakes that pretty much every new trader makes when they try to conquer the world of forex trading.

 

Not Knowing When To Quit

Admitting defeat and to a losing trade is a bitter pill to swallow, but you will inevitably come across a trade that will not go your way, and how you deal with it will determine your outcome. One of the most obvious mistakes that new traders make is letting their losses spiral into even bigger ones. They can be quick to enter into another trade because they simply don’t know when to quit. The thought that often goes through their mind is that they must be right and so they will wait for the trade to turn around. In the most extreme cases some traders will actually move their stops to give a bit more breathing space, which is the worst thing to do. Your stop is your wall to protect your capital and if you keep moving it, your capital could be at even more risk.

 

Trading With Too Much Leverage

Leverage can be a very dangerous tool when trading because the lure of money can sometimes cloud the minds of even the most rational people. Even though leverage can be used to make a lot of money, it is a double-edged sword and can just as easily destroy accounts if not managed correctly. It is advisable to not trade with leverage, and slowly build up your account over time than in a short space of time. Leverage will often cloud people’s judgement and let them run wild because they think they have more money than they actually do.

 

Not doing your homework

New traders are so enthralled by the potential to make money by doing very little work, but unfortunately it doesn’t work like that. One of the reasons why many new traders lose money and blow up accounts is because they have done their homework and not bothered to research what they are trading. The urgency to place trades without fully understanding the market you’re in is common with new traders, so before you place a trade you should know your asset inside and out.

 

Chasing trades

Overtrading can quite literally eat away at any returns that have been made during previous trading days. Experienced traders have actually learned the hard way about over-trading and chasing trades that aren’t there purely because they felt like they were missing out. This goes back to the first mistake where new traders don’t know when to quit, and so they go looking for trades that are out of scope of their trading strategy.

 

Not using stop losses

Stop losses are there to protect your capital from being wiped clean by a nasty trade that has gone south, and they are absolutely crucial for trading success. Tight stop losses generally means that any losses that are experienced will generally be quite small in comparison to larger, much wider stops, but the benefits to using them far outweigh the benefits for not using them.

 

Conclusion

There are so many things that new traders need to take into account when they first start trading, and they often miss the important things because they are too focused on ‘money’. Believe it or not, money isn’t the goal here, it is capital preservation and traders need to understand the risks they face when they place a trade and accept that there are some things that need to be done in order to be successful. If you want to be successful then you need to stick to your trading plan and make sure that you don’t make any of these mistakes, but if you do make mistakes it is important to learn from them.

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