A successful trader must avoid the following seven trading blunders
Categories: Forex Trading
Publish date: 2022-12-21
So you want to be a profitable trader? You must, therefore, avoid making the common mistakes that many traders make. When you first start trading, you will make mistakes, but the traders who succeed are the ones who learn from their mistakes and figure out how to avoid making them again and again. In this lesson, I'll go over the most common trading mistakes and offer some simple solutions. You can then learn from them and avoid them as you continue to analyze and trade forex in Malaysia.
1) Excessive and simultaneous trading
This is most likely the most common mistake made by 100% of beginners and approximately 90% of other traders. Furthermore, when approximately 90% of traders trade excessively, it is not surprising that approximately 90% of traders lose money over time. Another interesting piece of news is that if you are making multiple trades at once, you may be trading too much. There is absolutely no reason to trade more than once at a time.
Most people simply cannot learn to ignore the constant temptation to trade, so they invent all kinds of reasons why they should trade or invent signals that do not exist. The hard truth is that unless you learn to control yourself and stop overtrading, you will never consistently make money trading in the markets.
Changing your mindset about trading and the actual components of "profitable trading" is perhaps the quickest and easiest way to train yourself to stop overtrading. When you remember that less is more, and that trading less will result in more money over time, you begin to look for reasons why a potential trade might not work out, rather than trying to find any small reason to enter the FX Trading Market.
2) Spend excessive time thinking about trades and studying charts.
Overtrading is simply trying to trade too much. Traders frequently make the mistake of spending too much time going over charts, even when there are no obvious price behaviour signals to trade. As a result, if they stick to a trading plan, they usually don't trade.
If you find yourself thinking about your markets and trades almost constantly, you're probably overtrading and losing money as a result.
You must incorporate the chart into your trading strategy during your time away from it. If you stick to your trading plan, those regular hours away from the chart become "part of the plan," "part of the process." If you begin to deviate from the process and end up losing money, you are solely responsible. So, in the end, it comes down to your ability to maintain discipline and stick to your plan, which is why most people lose money on trades because they simply can't stick to a plan and maintain discipline over time.
3) Make trading decisions based on a short-term chart.
Day trading is one of the most common mistakes that new traders make. Many people had heard of "day trading" before learning more about it. This sets them on the wrong path, as they begin in a short time frame trading cycle, such as a 5 minute or 1-minute chart, which leads to serious overtrading and gambling as a trading addiction.
The lower time frame chart is not nearly as important as its counterpart on the higher time frame chart. The reason for this is that a longer time frame reflects more data and thus carries more "weight" than a shorter time frame. A daily chart bar, for example, is far more important than a 1-minute chart bar. You'll need more patience to trade over a longer time frame, but you'll get more reliable trading signals and less stress in return, which is a good trade-off in my opinion! When trading the day chart, you can simply set up trades and leave them open for 24 hours or more; this is how one can trade like a nomad and enjoy the lifestyle that trading provides.
4) Trade with real money before testing it on a dummy account.
This is a death sentence for your money, but novice traders make it all the time. The error is to trade with real money before testing your strategy on a dummy or demo account. There are usually a lot of things that occur. Because traders are unfamiliar with accounts and how they work, they make stupid mistakes such as taking more risk than they anticipated or failing to enter stops correctly. This, of course, results in a financial loss.
Furthermore, because you did not test your trading strategy on a simulated account (under real-world market conditions), you have no idea if your strategy or trading ability will be effective. Anyone would take their hard-earned money and start taking risks in the market and practising zero in the demo, which seems insane, but people go to Las Vegas and bet all their money away, so it's really just another form of that.
If you want to become a skilled and profitable trader, you must first test your strategy and trading abilities on a reputable simulated trading platform before attempting to trade in real-time! This will allow you to work out any "bugs" in the platform, as well as gain an understanding of the market and your trading methods without having to invest real money.
5) Perplexed traders trapped in a "black hole" of news interference
In the trading world, the "black hole" of news interference exists, and if you're not careful, you'll fall into it until all of your money is gone.
As is well known, traders end up "looking for reasons" why their trades should succeed. You can find almost anything you want on the Internet, and there are many opinions for and against any argument or position you want to take, including trading. Another thing that happens is that traders go online and begin "studying" economic and trade news, believing they have "figured out" what will happen next based on the X, Y or Z economic news releases. They then trade on that advice, which is extremely risky. This is risky because trading or economic news is usually already priced into the market, or factored into price behaviour, and the "big boys" have priced in what they think will happen ahead of the economic news.
When the news is finally released, there will be a market wash, with prices quickly spiking in one direction, only to rebound in the opposite. This is obviously nearly impossible to trade and causes the majority of inexperienced traders to lose money. This is the primary reason you should not trade solely on news.
Trading raw prices eliminates the complication of trading news. As previously stated, the news and everything that moves the market is already reflected in the price behaviour on the charts. So, once you've learned to read and trade price behaviour, you'll be able to read and trade news without having to analyze or read any of the news.
6) Failure to recognise that each trade has a unique set of expectations.
The biggest mistake most traders make when trading is failing to recognise that every trade has an equal chance of ending in a profit or loss. That's not to say you can't have a high-probability winning strategy; you can. But the thing about trading is that there will be random wins and losses in any given series of trades, so you never know the exact order of wins and losses in the trade sample. However, if you expect your strategy to win 60% of the time, that percentage should be visible in a sufficiently large sample size.
When you flip a coin, the same thing happens. You know you'll get heads 50% of the time and tails 50% of the time, but in 50% expectation, you could say there are 10 heads in a row, and if you don't get it, you'll be confused, and it takes multiple flips to get to 50% heads.
The same is true for trading! You may lose 10 trades in a row in a sample of 100 trades, but you still have a 60% chance of winning after those 100 trades. The implications are enormous. If you do not stick to your trading plan and remain disciplined even when you are losing money, you will panic and overtrade, causing your account to blow up!
Remember that any deal is essentially meaningless! It is the end result of a lot of trading, and it will show you whether your trading strengths and abilities are profitable. This also implies that you must manage risk to the point where you can see your strengths in action with a large enough sample size!
7) Not establishing a per-trade risk allowance
Do you know what your risk allowance is per trade? Is it a sum you can risk and sleep soundly knowing you could lose? If not, you'll need to make some changes.
Many traders don't even sit down and figure out how much money they're willing to lose per trade, let alone make sure it's an amount they're financially and emotionally prepared to lose on any given trade. If you haven't done this and are trading live, you should stop trading until you figure it out.
When learning and trading markets, you will make mistakes, especially when you are new. The difference between winners and losers, however, is that winners learn from their mistakes. The traders who go on to make a lot of money in the market are those who learn to avoid and learn from the mistakes discussed in this lesson, not those who never make any mistakes and trade "perfectly." It's easy to keep making the same trading mistakes until your trading capital is depleted. Your goal is to avoid having this happen to you.
[Disclaimer] The articles above are purely personal opinions and are not intended to be investment advice. Only for the purpose of mutual learning and sharing. There is no express or implied warranty regarding the accuracy or completeness of the above-mentioned information. Anyone who relies on the information, ideas, or data contained in this article does so entirely at their own risk.