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Top 4 Common Mistakes Made By New Traders…And Even Seasoned Traders!

Taking on something new can always be challenging, regardless of what it is. The level of uncertainty will often cause one to make unnecessary mistakes.There is a well known saying that comes to mind though. “If you fail to plan, you plan to fail.”

Below is a list of the most common mistakes traders make:

1. Not Having A Stop Loss (In The System)

Before we go any further, no, a mental stop is not okay.

Trading without a stop loss is a huge mistake many traders make. Remember, stops are your friend. They are there to keep you trading longer and preserve your hard earned capital.

Just think about what a stop really stands for…it is the point at which the original reason(s) for taking the trade no longer exist and we want to be out. It is that simple. Do not hold a position beyond your stop loss. If you do, you will find yourself in what we affectionately refer to as “hope mode.” Avoid it, your money will thank you.

2. Revenge Trading

Revenge trading is a deadly sin that can lead to the untimely death of ones trading account. You cannot allow yourself to get so attached to any one trade that if it does not work out you feel slighted, so much so that you look to get even. The bottom line is that some trades are simply not going to work out. You cannot look at any one trade as more or less significant than the next one coming or the one before it.

If you get stopped out, learn from it! Your future winners are locked inside your current losses!!

3. Having Unrealistic Expectations

It goes without saying but you need goals as a trader. This is how you can measure your progress and see if you are on track and what tweaks need to be made, if any.

That said, the goals need to be realistic and measurable. What do we mean by measurable? You cannot say that you want to make 6 figures by the end of the year without any way to track your progress throughout the year. In other words, where should you be at the end of the 1st, 2nd, and 3rd quarters? If you are not on track by the end of the 2nd quarter, what do you need to do in order to get back on track? This same idea can be applied to weekly and/or monthly goals.

Keep in mind that goals also need to be realistic. Making a bunch of pips sounds great on paper but is it something you are able to achieve based on your plan/personality. If not, you are setting yourself up for failure. Make sure your goals are in line with your abilities, not what sounds ideal.

4. Trading Without A Plan

While this is the last one on the list it is arguably the most important.

We all know the need for a plan but many fail to ever write one. And by write one that is exactly what we mean. Your plan cannot be “in your head.” Not having the plan on paper allows us to improvise as you encounter certain situations and adjust as you feel. This is a dangerous game to play. Would you expect to walk into a bank looking for funding for your business, tell them that your plan is all laid out in your head, and walk out with approval? Of course not! Trading is no different.

The plan should address all questions that you might be presented with during the trading day. If something happens that is not addressed in the plan, make note of it and come up with guidelines for the next time.

This is where many traders either make it or fall on their face.

If you have other mistakes that you or traders you know have made, we would love to hear your story!

Until the next time, stay patient, and trade well!