Trading is a full-time business so everyone needs to learn all its ins and outs before jumping into it but as a matter of fact, people think it’s easy to buy something and the next day sell in profit. They might be successful a few times this way but won’t be able to stay profitable for a longer period of time. We are all humans, driven by emotions, but you need to train yourself to avoid your trading decisions being affected by emotions. It’s necessary to know what you are doing wrong. So, here, we will discuss the top 5 trading mistakes every new trader makes.
Trading without planning
This is something every new trader does. Without doing proper analysis they randomly buy an asset expecting it to grow in the coming days. That can be called gambling but not trading. So every time you look to trade something you need to evaluate assets fundamentals and look for some bullish chart pattern to jump into and make sure to point out the stop loss and profit targets in advance.
Fear of missing out (FOMO)
FOMO is another top mistake traders make. It is a scenario where price has already made a significant move and traders think it will keep moving in the same direction and jump into it without even a stop loss. Entering a trade with the feeling of missing out can not only cause a loss of capital but also affect your confidence level which can affect your future trades as well. Always define the situations and chart patterns you should trade, and stick to them.
Not cutting your losses
This is another big mistake made by newbies while trading. They keep holding a position hoping it will turn back into their favor. But the market is nobody’s friend, so you need to be proactive in your trading. Don’t be shy of cutting your negative trades when you see a trend reversal or breakdown from a major support level. Saving your existing capital is the foremost thing a trader should look for. If something goes opposite, cut it and wait for a better setup to enter again because trading by hope will ultimately vanish your capital.
Too large position size
This is another mistake fresh traders do. They tend to open big-sized positions to become rich quickly and end up making huge losses. Keep the position size small so that you can easily bear the loss if it hits the stop loss. This way you will let the setup play properly while with a big position you might close the trade on a small retracement, because of your fear of loss. Your position should not be more than 4% of your trading capital.
Not maintaining a trading journal
Keeping records of your trades makes you sustainable in the trading business. Keep a record of your entry and exit points but also why you entered this trade. You will have a database later that you can study and improve yourself with. By logging everything this way, you might be able to figure out a high-performing trading pattern that you can use to make money non-stop or you might come to know a charting pattern that fails a lot.
Hope you will take notes and will avoid these mistakes in the future. It will not only keep your trading confidence and spirits high but also will keep you profitable in your trading business.