As humans, we make mistakes. Some of these mistakes we get away with. Some can be very costly. Some of the best traders in the world can fall victim to these mistakes.
What are these mistakes? How can you avoid making them?
1: Not having a plan
Some just go into trading with no formula or trading strategy of any kind. They just go into trades and hope for which ones turn out well. Doing this will make you win some and lose some. Will you make more gains than losses? For sure, you’ll have to pay more in trading fees.
Yes, the goal of every trader is to make money. But that doesn’t mean you should skip the fee days or at least hours required for you to make a plan before you begin trading.
What is included in a trading plan?
1: Defined goals
2: Timeframe
3: Risk reward ratio
4: Your budget.
After developing a trading plan, you’ll then need a trading strategy.
A trading strategy includes…
Where you want to trade
How you want to trade
What you are basing your trading decision on.
You’ll have to go to work before going into a trade. Except you are leaving your money to chance. And that’s not good.
2: Fear of taking a loss:
No trader wants to make a loss. If you’ve seen one, please keep such far away from me.
When a trader enters a trade and it’s becoming a loss, it’s best to just cut your losses and move on. Some however will still stay on. Especially when they believe their analysis was good, and they hope the trade goes well. However, time has proven that no one can be 100% right about the market. So if your analysis proves wrong, take your loss and move on.
Staying in a trade that us going bad will only make you lose twice. And that’s like hoping a basket will hold some water.
Some things can can cause your analysis to fail:
– Has there been a shift in the market?
– Was there some news that make people sell instead of buying?
– Did something happen with the team behind the token?
These and many more has to be considered.
Doubling down on a bad trade may only end up eating up your hard earned money.
3: Not using Stop Loss (SL)
Stop losses are automated orders set to take you out of the market when the market is not going in your favor. A certain point is set for your trade to close and reduce the losses you may have made if you stayed on in that trade.
If you are using SL, it should be in tandem with your trading strategy.
So set a stop and let it ride.
4: Trading too many markets:
Experienced traders who know the market select markets they want to enter and stick to them. Whereas, newer traders want to buy all the exciting coins they see.
Thus becoming a literal jack of all trades.
We are limited in the amount of focus we can give to certain things. Each trade does require research and attention. So do not cut corners and enter multiple trades, it’ll burn you.
If all you’ve made from trading in the last month is not up to the percentage increase in Bitcoin or Ethereum, you’re wasting your time. You’re better off holding one of those coins.
5: Overtrading:
Does the number of trades you inter increase your profits? This is more often than not a fallacy.
Let’s take an example:
You entered 4 trades. We’ll name them trades A – D
Trade A does 20%
Trade B does 10%
Trade C does 32%
Trade S does – 2%
From the above, you’d have ended the day happier if you had stuck with trade C and A only.
You ended all trades with a 15% profit when it could have been more.
Now, the market is not your friend or father that makes it sure sticking to just a trade or two will always get you better returns. But if you do not overtrade and stick to just few trades as one of your trading strategies, you’ll have enough time to make research and validate your trading decisions.
Have you make one or more of these trading mistakes? Please share your experience below.
