Understand Common Trading Mistakes and Develop More Consistent Approach
Novice traders walk confidently in share market with hopes to earn high profit, but very quickly they learn that making money consistently is harder than they expected. This realization can be costly and discouraging for some. The possibility to make money attract people but reality of losing quickly deters them.
Understand some common trading mistakes active share investors make. For more details you can visit capital.com homepage
Just like in any other profession preparation is the key. However, very few get trained before diving in the trade market. It is like a jungle, where large animals eat the small, vulnerable ones. Many trading books are available, so take time to read them. Walking in the share market with handful of cash to earn money from professionals is wrong expectation. This is called gambling and not trading.
The fact related to becoming a profitable trader is underestimated. Without proper or on-job training at a financial term there can be difficulties. Even high educated traders get entrapped in technical analysis. Market is volatile and uncertainty is always looming. How you approach in this uncertain atmosphere is more crucial than the kind of analysis applied.
For basically everyone, money means safety, security, and power. Therefore, they get emotionally involved, when the market moves against them. It makes them feel unsafe, so they respond emotionally.
Preparing a trader for share market emotional roller coaster is challenging. Fear of getting labeled as a loser takes many traders stray away from their trading plans.
Expert traders always avoid checking their daily results but are very much concerned about their long-term trading results [monthly or yearly].
This is one way to desensitize emotions connected with money. Another way, new traders can reduce their emotional chare is to trade small size. It helps to minimize emotional distress and losses, which is related to losing large capital amount. Overtime they can raise share size level until they attain personal comfort zone.
Ignore record keeping
Keeping trade diary helps to make money and turn into a better trader. Even if you earn good profits, it is crucial to become better trader after every trade. Emotions can be kept under control with good record keeping. Even if you lose money slowly, you are learning from errors. You can say money management and keeping a diary is more significant than technical analysis.
Expecting only profits
Entering the market with an assumption to be successful is a mark of overconfidence. Emerging traders use calculator to predict their earnings but this is wrong. It is also necessary to check the negative aspect or potential loss. Market does not care for you, so enter with neutral attitude. For example, in bullish condition go long or in bearish trend go short.
Blindly following automated tools
Technology is good but depending on them is not advisable. How trading signals get generated need to be learnt. Following automated trading tools blindly to trade means you are not certain of what you are doing. Giving up thinking and analyzing indicates that you are toast.
Lack of specialization
Several kinds of financial instruments can be traded like commodities, shares, binary options, Forex, and futures. Generally, beginners are not aware about each security types because learn about each one’s characteristic is a daunting task. So, they are vulnerable to over engage and flow in any kind of hot market segment. To become a successful trader, it is necessary to be committed and dedicated to a specific category. Trading edge is crucial to identify real and fake decisions you make on price action. Improper timing, ignorant about going short, setting improper stop orders and not checking risk-reward ratio are some areas, where novice traders make mistakes. Understanding these common errors and learning to minimize them is a consistent process, during live trades.