Capital loss and account debt are common among traders,
but they are even more prevalent among beginners.
This is due to several different factors, which we will discuss in this article.
The most important of these factors and how to preserve capital regardless of experience level.
Lack of Knowledge and Experience
Not understanding the nature of the market is a major cause of losses in general.
You must understand the nature of the market you are trading in, whether it is the forex market, stocks, cryptocurrency, or any other market.
You must understand what controls the market and what drives it effectively.
And monitor the market for a sufficient period to learn all possible details.
Lack of a Clear Strategy
One of the most common problems, especially among beginners, is excessive distraction.
And the lack of a single, clear trading strategy for sufficient practice.
It's common to find traders trying a new strategy every week.
Some even try a new strategy daily.
This is definitely a mistake. Any strategy, even a simple one,
requires a significant amount of time to practice in various market conditions.
This allows you to identify all the strategy's strengths and weaknesses.
Switching between different trading methods is a serious mistake that should be avoided.
Combining multiple different schools of thought
This might seem strange at first, but unfortunately, it's a reality.
While combining many technical schools might seem like it will give you the best entry point,
in reality, combining several different and complex schools
will be a source of confusion and hinder your decision-making, ultimately having a negative impact.
The idea of combining schools is good, but only if it's primarily two schools.
A third school can be used as a supplementary tool.
It's not necessary to trade based on three analytical schools agreeing on the same point.
The fewer and easier the number of schools to use, the better.
Overuse of Technical Indicators
Technical indicators are generally beneficial in trading.
However, using too many indicators in trading and technical analysis is not advisable.
This is exhausting and often has the opposite effect, leading to losses.
Therefore, using one or two indicators at most is sufficient for trading.
But you must practice using the indicators for a sufficient period of time to ensure their strength and reliability, and whether the indicator repaints itself or not.
Poor Money Management
This is considered the most important and powerful factor in losses for traders, whether beginners or professionals.
There are many money management practices that traders use that lead to losses.
These include repeatedly entering with a high lot size in the same currency pair in an attempt to generate large profits.
Or, when prices reverse, trying to compensate by entering from other entry points with a larger lot size.
Or, failing to set stop-loss orders or using significantly different and varying lot sizes between trades, and other factors that ultimately lead to rapid account losses.
Learning money management is one of the most important steps in trading.
Even with the strongest entry strategy,
poor money management can lead to losing your entire account
or most of your profits in a single trade.
Lack of emotional control
is another crucial factor, and anyone can fall into this trap, regardless of their experience.
When a trade is lost, a trader might become angry,
trying to recover as quickly as possible, which can lead to flawed analysis.
This, in turn, can result in incorrect decisions and further losses.
This can also lead to a breach of money management principles, potentially causing the account to become unprofitable.
Greed is another significant factor, but it's a common pitfall for beginners.
Therefore, you should avoid greed and the desire for large profits, especially if your account is small.
You're forced to use a small lot size, resulting in smaller profits.
However, considering your account size, these profits are still considered good, a fact that beginners often fail to grasp.
Therefore, everyone should understand this point well and control their emotions.
Controlling your emotions is crucial and requires careful attention; by mastering this aspect,
you will have taken a significant and positive step towards success as a trader.
