- When you start to trade, you are going to make some of the mistakes.
- But your success will depend on how early you realize your mistake and find a way to overcome it.
Starting to trade with real money instead of practising trading in a demo account
- This is the worst possible mistake that a trader can ever make.
- But unfortunately, some of the new traders will make this mistake for a long duration.
- In the beginning, traders are not familiar with the workings of the account.
- Due to this, they will end up making errors such as not placing a stop loss properly or risking more money, etc.
- Thus, they will also end up damaging their account and eventually lose a lot of money.
- Thus, initially, you must practice trading in your demo account.
- Once you get familiar with all the things, then you can start to trade with real money.
- Also, a demo account will help you to backtest the strategy, which is also very important before using the same in the live markets.
- To become a successful trader, your main goal should be to backtest every strategy on a demo account and your ability to trade it.
- With this, you can trade with that strategy very easily in the live markets.
Entering into multiple trades simultaneously and overtrading
- This is the most common mistake that every trader will make.
- About 90% of the traders will end up on the losing side over the long run when they are carrying out multiple trades simultaneously.
- Another fact that you should know is that if you have taken more than one trade at a time, then it is supposed that you are trading too much.
- It is illogical to be in more than 1 trade at any point in time if you are a beginner in trading.
- Many of the new traders tend to overtrade for many reasons like some traders will want to recover their losses, and some of the traders will use the same trading system without even back-testing.
- But the truth is, unless you learn to control your emotions and stop over-trading, you will not become profitable in the long run.
- You will only be able to make good money by taking fewer trades.
Listening to the news while trading
- Trading based on the news is the reason many traders will blow up their trading accounts.
- Here, traders will go on the internet and will start to surf the news relating to trading or the financial world; then they will find some of the good or bad news about one particular stock, and then they will trade that stock based on the opinions with even heavy quantities and end up losing all the money.
- This will happen because that news had already impacted the price of that stock before it even came out.
- Trading with a price action technique is always profitable rather than trading based on the news because news and other big events that affect the market are already reflected on the charts, and by using price action, you can easily identify the same.
- With this, you can trade the news and other big events without even actually knowing the same.
Not considering the worst-case scenario
- This error is related to trading psychology.
- Before taking any trade, you will have to understand that every single trade you take has about an equal chance of winning or losing irrespective of which strategy or price action concept you will use.
- This will not mean that you cannot have a strategy that has a higher percentage of a win rate.
- This simply means that for any series of trades, there can be a random outcome, and the sequence of that outcome will depend upon several factors.
- A single trade will not mean anything.
- To be able to analyze your ability to trade and how well your edge will play out, you will need to learn to manage your risk over a large series of trades.
- With this, you can see if your trading system is profitable or not.
Feeling uncomfortable during trading and not following the trading plan
- When you enter into the trade, you should hold the trade unless you stop loss or the target gets hit.
- You should just not exit the trade in between your target or the stop loss.
- Often many of the traders will analyze the market, and they will find an opportunity in a particular stock; then they will enter into the trade, and after some time, they will realize that the price has slightly moved in their favour, and then they will exit the trade by fear.
- Here, you will have to understand that while trading, you are going to have winning trades as well as losing trades, but how much you lose in your losing trade and how much you will win in your winning trade is what matters the most.
- Thus, you should always follow your trading plan, and you should not freak out when the market slightly moves in your favour.
Focusing on the profit and not the process
- When a new trader comes into the market, he wants to become a millionaire overnight.
- But this is the only impossible thing in the world.
- You should understand that trading is not a trick; if you have learned once, you will be able to earn a lot of money.
- Instead, trading is a skill that will take a lot of time to develop, and as far as developing a certain skill is concerned, you will need to follow the process.
- Traders are focusing too much on the profit and the rewards, but rather than focusing on the profit, you need to focus on your trading system, trading psychology, and risk management.
- Also, you should remember that profit is the outcome of your process, and that is why you should always try to follow the process rather than focusing on the profits.
Taking a late entry into the trade
- It will happen with every trader, where you will analyze the market and you will find a setup for entering into the trade, but due to some reasons you just didn’t enter into the trade.
- After some time, when you see the price has already taken off from your imaginary entry point, then you will get frustrated and rush to enter the trade at a market price, which is a big mistake.
- Instead of entering into the trade, you will have to pass the opportunity and remember that this is not the last opportunity and that there will be many more opportunities yet to come.
Not planning the stop loss and risk per trade before entering into the trade
- Risk per trade is the maximum bearable loss that a trader can take on a single trade.
- Your risk per trade will define the quantity with which you should enter the particular trade.
- Many new traders will neglect these technical things, and they will enter into the trade with heavy quantities.
- If you are not managing the risk and blindly entering into the trade, then it is high time for you to work on your risk management and capital preservation skills.
Conclusion
You will make mistakes as a trader, but you should always learn from those mistakes.
Frequently Asked Questions
Q1) What is the biggest mistake in trading?
Overreliance on the software is the biggest mistake in trading.
Q2) What is the hardest mistake to avoid while trading?
Letting emotions drive your decisions is the hardest mistake to avoid while trading.
Q3) What is the biggest fear in trading?
Fear of losing money and fear of missing out are the biggest fears in trading.
Q4) Which is the safest type of trading?
Long-term trading is the safest type of trading.
Q5) Which trading is most profitable?
Momentum and swing trading are the most profitable.
About Us
Nifty Trading Academy is our academy where we teach you about the stock market as well as technical analysis. We also provide live trading sessions and upload blogs for the same.