Mistakes Beginners Traders Make – II

By | January 7, 2015

In Continuation with Previous Post

5. Trading On Emotions

This is a weakness faced by most traders, not only new market entrants. The fear of losing money makes it hard for most new traders to make risks.

Greed gives rise to many poor decisions that result in a depleted  trading account. Trading on emotions is one of the most common mistakes that lead to  failure.

6. Over Leveraging

The market is the most highly leveraged markets

This increases the ability of a trader to profit greatly and grow their account within a very short period.

However, when you use too much leverage, a single loss-making trade can instantly wipe out your whole currency trading online account.

7. Lack of Knowledge or Experience

Trading looks so easy, especially when you read the success stories of how someone opened an account and made big profits in a matter of days or even hours.

However, the truth is that  trading takes a lot of education before one can attempt to trade successfully. And even afterwards, it still takes many trades before one can start making consistent profits.

Use paper trade to prepare yourself for the live account and only trade on real money once you have consistently made profits on the practice account.

8. Lack of Risk/Reward Implementation

Even the simplest of us all knows that in order to make profits you need to gain more than you lose.

Unfortunately, most of us do not put that knowledge into practice when we first start trading on the market.

Disregarding risk reward ratios result in new traders losing large proportions of their trading accounts on very few bad trades.

9. Wrong Position Sizing

Before knowing any better, most new traders begin by thinking that a wide stop loss means we can risk more and a small stop loss means we have risked less.

This reasoning leads us to adjust stop loss when we want to adjust the traded lot size. This is a wrong approach to managing risks yet very common with traders.

10. Gambling Rather Than Trading

Gambling provides a nice gaming thrill that brings you back to the casino for fun and games again and again.

Trading is a business investment that should never be approached in the same way as gambling.

You need a strategy and you need to keep records. You need adequate knowledge and experience.

Summary

There are many trading mistakes that if not pruned off during the beginner period, they’ll frustrate your trade growth and make it impossible for you to have a fruitful, long term, and successful trading career.

If you have any of the above tendencies, you should take steps to nip it in the bud early enough.

5 thoughts on “Mistakes Beginners Traders Make – II

  1. ANAND

    Also to add the 5th point is missing somewhere between
    Mistakes Beginners Traders Make – II and Mistakes Beginners Traders Make – I
    please update on this

  2. ANAND

    Bramesh,
    The link to previous post on part 1 is not going <>, please make changes to reach the previous post also so that we revise
    Mistakes Beginners Traders Make – I

  3. Satyanarayan Vishwaroop

    Very nice article Sir. Very helpful to avoid the losses during trading.

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