Mistakes are inevitable when you’re trying out something new.
For new traders, mistakes often translate to loss of capital.
Improve your trading account’s odds by watching out for these common newbie trading mistakes:
1. Trading without a plan or journaling
When you follow something that you’ve written down when you were objectively weighing odds, you’ll have a better chance to make profitable decisions when the market starts throwing out plot twists and surprise boss battles.
But you can’t improve what you don’t measure. A trading journal will help you fine-tune your trading plan.
2. Revenge trading
Revenge trading happens when a trader, coming from a particularly frustrating loss, decides to make up for it by being more aggressive in his/her next trades.
This is dangerous for your account because it forces you to throw your trading discipline out the window. It shifts your focus from your trading process and good risk management to trying to make enough money to recover your losses with less thought out trades.
It’s also a lose-lose situation.
If you lose a revenge trade, you deepen your drawdown with a trade that you had barely planned for. If you win, then you’re led to believe that trading on guts and emotion works and you’re enticed to do it again.
3. Letting losers run / not setting stop losses
You’ve probably been on the wrong side of the trade and thought, “Oh well, my original idea is still valid anyway. I think I can handle it,” while crossing your fingers that the price reverses and moves in your favor sooner or later.
Face it, you won’t always make the right calls. And that’s perfectly normal. But you’ll need stop loss points – even just mental ones – to make sure that you are able to survive and fight another day when you do lose a trade.
Think of it this way: If you let your losers run and close your winning forex trades early, you’d end up with losers that are bigger than winners. That won’t exactly tilt the odds in your favor, would it?
4. Having unrealistic expectations
Making a truckload of pips every single day sounds awesome, but is it possible? Maybe with a great deal of experience and skill thrown in with some luck, but let’s be realistic–that doesn’t exactly describe the typical noob.
By making stratospheric goals, you might be setting yourself up for disappointment. And if you’re disappointed often enough, you might quit trading entirely and miss out on a potentially profitable endeavor.
Instead of aiming for bajillions of pips a day, set realistic expectations and goals and then take concrete steps to enable you to achieve these goals.
That’s it for me today! I hope this list helps you.
I mean, I’m sure you’ll make a lot more trading mistakes – ALL traders make mistakes – but I hope you avoid these common ones.
Good luck and good trading this week!