Nine mistakes novice traders make

Do you want to try your hand at trading but do not know what to start with? The first thing is to work out your trading strategy, explore the terminology and distinctive features of the market. Also, never forget to act within the limits you set for yourself in your trading and analyse the information you get. But even following these rules, no one is protected from making mistakes. We have identified nine major mistakes of the novice trader not to let your trading leave you with bad memories only.

1. Lack of risk management

If you do not want to start your trading losing money, you should always bear in mind the possible risks, for example, the total loss of your deposit. In case of a market collapse, quotes may change in a few seconds due to unpredictable events: an unexpected bear candle or changes due to news in the media. But there are tools that will help you avoid losing you funds unexpectedly, e.g. control tools:

• Stop loss — limits your losses at a certain price level upon reaching it and closes your order automatically.
• Take profit — closes out your open position for a profit (securing your gains) upon reaching the target price level.

2. Trade using unfamiliar investment instruments

Use only familiar financial instruments (purchase of shares, contribution to a fund or investment in digital assets) that you have worked with before and know their features. It is important to understand the level of volatility of a particular instrument and compare the market’s dependence on the news. For example, stock trading implies a high level of liquidity, and Bitcoin trading implies risks of high volatility and strong dependence on the news that shape a relatively new market.

3. Lack of a clear trading strategy

Always draw up a clear plan and follow your goals during a certain period. If you want to reduce the number of mistakes, you should not spontaneously change your strategy in that period. For example, when you opt for a scalping strategy, do not forget that it is short-term trading with the withdrawal of profits in the intraday range, so you should work with short-term positions. Do not jump from this strategy to mid-term or long-term positions, as they will demonstrate different levels of volatility.

4. Emotional trading

Always follow your trading plan and keep a journal of trades. Exclude emotions and abrupt changes in behavior from your trading. The ability to control your emotions stands above all!

5. Trading non-stop

You should not strive to trade constantly. The fewer deals you make — the more effective they will be. Having no position is also a position.

6. Economic forecasts cannot be a 100% guarantee of positive result

You should always have your own vision of the situation. You should not fully rely on the opinions of even very well-known analysts, trade according to your own rules.

7. Trading against the trend

The trend can be ascending, descending, flat or false. Therefore, you need to see your entry and exit points. The timeframes (periods of time) will help you do that, and it is best to analyse a trend using at least two charts. For scalping, choose the 30-minute (M30) and minute (M1) charts, for trading long-term it is preferable to use the daily (1D) and weekly (1W) charts. Thanks to this information, you will be able to analyse the situation on the market and see the trends that will further help you to find the best entry point.

8. Investing the last money in trading

Fear of losing all funds will become your additional psychological burden that will disrupt your trading. Every professional trader will not be able to cope with such emotions, let alone a beginner. The most experienced traders advise to invest no more than 5–10% of the total amount of your capital.

9. The desire to immediately abandon a job or other source of stable income

Drop these thoughts until you see a positive trend in your trade for at least a year. If you succeed then you can start thinking about trading as your main source of income.

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