Common mistakes of traders
Beginning your journey into trading often leads to mistakes that drain your funds. Initially driven by hopes and dreams, many find themselves wishing to return to square one or making it their ultimate goal to recover lost funds. Some seek to compensate for their losses, believing they can retaliate against the market and reclaim their money, only to discover they end up losing more. If you feel the urge to retaliate against the market, now is the best time to step back, as emotions and lack of control will only increase your losses and deplete your funds. Therefore, dear trader, here are the most common mistakes that most novice traders fall into:
1. *Profiting on Demo Accounts*
Most novice traders, upon entering financial markets, especially the forex market, open a demo account to simulate real market conditions. They practice trading, executing trades, and applying what they've learned from technical analysis schools and various strategies. They open trades, both buying and selling, with large contract sizes, impressed by the profits they make. This boosts their confidence, prompting them to swiftly open a live trading account and fund it, hoping for quick wealth. However, when they encounter losses and see their accounts in the red, doubts about their trading decisions and strategies arise. They begin to believe that profitability only happens in demo accounts and quickly close their positions when they turn negative. Therefore, dear trader, you must be patient with both profit and loss to sustain and achieve profits in trading.
2. *Trading Without Stop-Loss Orders*
Some traders believe that by opening trades without setting stop-loss orders, they can wait for the price to return to their entry point so they can exit. Alternatively, they open additional positions, hoping to break even. However, if the price continues against them, they realize they have lost all their capital. Hence, whenever you open a trade, you must prioritize placing a stop-loss order because it informs you of the expected outcome of the trade, whether profit or loss.
3. *Scaling-In*
When traders open additional positions as the price moves against them, they anticipate a reversal, leading them to increase their position sizes from nearby levels. If the price continues in the opposite direction, their losses increase, sometimes wiping out their entire capital. Therefore, scaling-in should follow specific rules, not randomness, to sustain participation in financial markets.
4. *Trading Based on Economic News Predictions*
At specific times, important economic news and data are released, affecting various currency pairs differently based on the news' significance and impact on specific countries. Traders may enter the market with large contract sizes, anticipating the pair's movement to achieve sudden and easy profits. However, prices often make sharp movements in both directions before settling on a direction. Therefore, it is best to develop a post-news trading strategy to reduce and limit risks compared to your news expectations and entry before these moments. Therefore, if you are out of the market during these times, you should monitor and be cautious and only avoid unexpected losses.
5. *Trading Based on General Economic Data for Countries*
When trading and entering sales or buying orders due to a book you read, an article, or a documentary about a particular country's economic circumstances, whether in good shape and economic growth or a bad condition, you're day traders may change those figures temporarily and the data might switch from favorable to adverse, and thus, a long-term perspective is infeasible for the day trader.
6. *Trading Without a Plan*
Before entering any trades, whether buying or selling, you must define your objectives for the trade and when you will exit. Without a trading plan, you engage in unnecessary gambling that often results in the loss of your capital.
7. *Over-Reliance on Indicators in Your Trading*
Many traders rely entirely on indicators when entering trades, misunderstanding their true purpose. Indicators follow price movements rather than predicting them. They should assist in tracking price movements but not be solely relied upon for entry and exit decisions. Price action alone is sufficient to anticipate market movements, rebound zones, and optimal correction areas.
8. *Continuously Monitoring Charts*
Constantly watching and monitoring charts can negatively affect a trader's psychological stability. As prices fluctuate, you may feel compelled to enter trades, calculating missed profits, leading to a state of anticipation, tension, and emotional turmoil. This impairs your ability to make sound decisions, resulting in numerous trades across smaller timeframes, scattering potential profits and diminishing your capital. Therefore, dear trader, excessive trading and chart monitoring cause you to miss real opportunities and disrupt your normal life. Define your daily goal, whether profit or loss, close the chart, and enjoy your life naturally.
9. *Choosing a Broker*
Most novice traders chase misleading offers from unlicensed brokerage firms that fail to execute their orders in the actual market, turning client losses into their profits. Conversely, client gains become the company's losses, prompting such firms to offer deposit bonuses of up to 100% to lure novice traders into doubling their funds and trading balance, causing them to disregard capital management plans and risks, and open large contracts that lead to losing all their funds. The deposit, with the hope of making up for their losses.
If the client wins, this is considered a loss to the company, so it places obstacles to prevent him from withdrawing his money and closing his trading account. Therefore, olxforex recommends exness company
because it is one of the world's best-rated companies and has the strongest global licenses, offering features that you will not find in other trading companies, including instant withdrawal, where your money reaches you in moments, regardless of your profit value. It offers various types of accounts to suit all different traders' strategies.
