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We’ve listed 5 extremely common trading mistakes below to help you to avoid them in the very beginning time of your trading journey.
1. Not Having a Trading Plan (Ignoring It)
Before you enter the trade, you should know the amount of money you want to invest, the exit point, and the maximum loss you are ready to incur should things get messy. Never lack a trading strategy to decrease the magnitude of your losses.
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2. Trading Against the Trend
This strategy can not apply for the short-term trader. Suddenly, your asset begins to deteriorate, you have 3 options: close the position right away to cut your losses, buy even more of the said asset hoping for an upcoming reversal or just wait. The second option is also called averaging down, as you bring down the average price of your holdings. Adding to a losing position can work when trading on a longer time frame.
3. Failure to Use SLTP Orders
Stop-loss and take-profit orders can become a valuable addition to your trading arsenal. Take-profit can be of great value, yet it is stop-loss that can make or break the deal. The thing is it is sometimes hard for people to close deals when necessary — either due to lack of time, poor discipline or excessive emotionality. An automated program, deprived of any feelings, can help you close the deal when neccessary.
4. Surrendering to Tilt
Your emotional state is of tremendous importance when you trade. It is no secret that when you do the wrong thing over and over again, you are not going to get great results. You can easily run out of money on your account in only one sitting. To break the vicious circle, a trader is advised to take a short break, relax and concentrate on activities, unrelated to trading.
5. Too Much Leverage
Do not rely on an extremely high leverage (at least, when you are not 100% sure about the direction of the trend), as it can do more harm than good. But in reality, it is usually just a road to oblivion. One sudden move in the wrong direction and your investment is wiped out.
As you can see, most mistakes in this list have to do with how your treat your losses, not earnings. Letting the profit grow is important, yet not as important as your determination to close losing deals before it is too late.
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