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Too many traders find themselves making the same mistakes over and over again and having to refund their trading account time and again. To become a successful trader, one of the most important things to be able to do is to learn from our mistakes and to make changes to how we trade that will prevent us making the same mistakes over again. Here we will look at some of the most common trading mistakes that people make and how they may be holding you back from success.
Not Becoming an Independent Trader
To be a successful trader, you need to be able to operate independently. This means that you need to develop a trading plan and strategy and must stick to it. You need to disregard the opinions of other people and make sure that if the trade fits your trading strategy, you make the trade. One of the biggest mistakes of traders is to read opinions online and then begin to second-guess their decisions.
Not Managing Losses
There are a number of aspects that relate to how you manage your losses and they are all important. To begin with, you need to implement stop loss orders. Failure to do this is a common mistake and can be one of the most costly. Stop loss orders ensure that losses are limited before they can get out of hand. A related mistake that many people make it to chase their losses and let them mount. It can be difficult to let go of a losing position as you might think it will turn around and work out in the end. However, taking this approach lets your losses mount, at the same time as tying up your trading capital in a losing trade. Quick action tends to be more successful than holding on when things don’t go your way.
Trading Multiple Markets
Like with anything in life, you tend to be more successful when you focus on one area and become skilled in one area than if you try to diversify too much. The same is true for trading. Some people trade multiple markets at once in the hopes that they will find success somewhere. Unfortunately, the more common outcome is to find no success at all. This is because when you are spreading your focus, it becomes too difficult to gain experience in any area sufficiently to become an expert. It is more worthwhile to spend the required time on one market in order to be able to improve your strategy and practice until you excel.
Some traders feel that once they have developed a strategy and are seeing some success, they can sit back and relax. This is a big mistake and one that will hold you back significantly. Trading requires constant work. You need to constantly think about how you approach trading and how your trading strategy fits with your personality and emotions so that they complement each other. You need to constantly review charts and analytics, updating your strategy regularly. You need to keep on top of the news so that you understand what impacts the markets and how the news may impact your trades.
Your Approach to Trading
This is an area that many people don’t spend enough much time thinking about and this is a big mistake. People just assume that if they are successful at trading, it will change their lives and make a fortune of money. If you have this mindset, you will probably never be a successful trader. Rather, you need to approach trading as a long-term project. This will help you to focus only on the trades that are really worthwhile, instead of trying to cram as many trades in per month as possible. It will help you to understand that one or two really successful trades a month is more worthwhile than 15 little, insignificant ones. If you appreciate the fact that trading less does not mean making less money, you are more likely to take a relaxed approach to how you trade and focus on the trades that will be more successful.
Once you understand which mistakes you are repeating, you can take steps to avoid them. Because most of these mistakes are common between traders there is plenty of information online about how to get past them and become a more successful trader. The most important step to take for anyone who is thinking about trading is developing a trading strategy. This is time consuming work and you need to spend the time perfecting your strategy before you begin. Without a solid strategy, any other work you put into trading is likely to be wasted. Constantly tweak your strategy, but never consider trading without it. And remember, slow and steady wins the race when it comes to trading.