Do you know trading is different from investing? Investing is generally buying and holding it for the long term, whereas trading is a short term game. Most of the value investors don’t like trading because they believe it as gambling.
However, some people earn their living by trading. More importantly, some traders are also living a financially independent life from trading. But there are many people who have lost their entire capital because of some mistakes.
In this article, I will share the top five mistakes that you need to avoid during trading.
Five Mistakes to Avoid During Trading
There is a famous saying in the trading space, “Trading is simple, but it’s not easy,” I genuinely believe in it. With technological development, it’s elementary to access the data, price chart, enter a trade, etc., but making money is not easy. Now let’s look at the common mistake that you need to avoid while trading.
- Trading Without a Plan
- Impulsive Trade
- Taking More Risk than You Can Afford
- Not Having a Stop Loss
- Using Multiple Strategy at a Time
Remember, it takes a great deal of self-discipline and patience to make money by trading. If you can take care of these common mistakes every single day, then you can indeed become a successful trader.
1. Trading Without a Plan
Trading is a game of probability. You can only increase the probability of winning trade, but you can never become certain. Unless you have a plan, you will enter into a trade without any rules, and the chances of success are uncertain.
When you have a plan and follow a strategy, you will gain confidence and stay in the market for a long time. If you don’t have a trading plan, you will make impulsive trades, which means your emotions will take your decisions, which is not a good thing.
2. Impulsive Trade
One of the crucial things in trading is keeping control over your emotions. Most of the traders are influenced by news or suggestions, and they take trades when they feel good. Here are the top five emotions which you will feel during trading.
Identifying these emotions and practicing self-discipline can help you to overcome these emotions while trading.
3. Taking More Risk than You Can Afford
Another big mistake that many traders do is they take more risk than they can afford. It’s a newbie trader’s tendency that he/she can win every trade and take over risks. This is a prevalent mistake, and you should identify it early; otherwise, it may be dangerous in the long run.
4. Not Having a Stop Loss
Never become sure about your predictions, so always have a stop loss. It’s a technique by which you are taking a particular risk and putting your stop loss to come out of the market with less risk if your prediction goes wrong.
5. Using Multiple Strategies at a Time
The simpler your strategy is better. If you use multiple strategies at a time and make your plan complex, you will get confused. In fact, it is not advisable to use more than three or four indicators on the price chart. Practice a single strategy until you master it; if it works for you, then continue.
If you want to trade bitcoin, then you can learn the strategies from the bitcoin trading app. Here you will find many crypto experts who have become successful by trading bitcoin.
Now, if you want to take your trading business seriously, avoid these mistakes. Make sure you do not take much risk than your tolerance level. Moreover, always have a trading plan that will guide you through your journey, never make impulsive trades. Lastly, I hope the information useful and please share your opinion on this post.