5 Common Trading Mistakes To Avoid in 2023
They say we should always learn from our mistakes and with online trading it’s no different. The only issue is, our trading mistakes can cost us financially and so we must learn quickly and not repeat mistakes in order to become successful traders.
Here are some common trading mistakes to try to avoid to try avoid in 2023.
1. No Trading Plan (or ignoring it)
This is probably the most common mistake. People hear the trading success stories and decide to dive straight into the world of online trading because how hard could it be, right? Mistake number 1. Trading is not easy and close to 90% of people will lose money when financial trading. Not great numbers are they?
Before beginning to trade, you must sit down and write a detailed plan (and we urge you to actually write it down). The plan will cover things such as what markets you wish to trade, how much money you are going to place in your trading account, entry and exit points, where a stop-loss will be placed, if you’ll use other order types like profit orders etc.
Write it down before opening the trade and once opened, stick to the plan. Do not move your stop-loss or ‘double down’ if the trade is going against you.
2. Running Your Losses
Successful traders never run their losses – they stick to their trading plan, know when to get out of a losing trade for the minimum amount of damage and then move onto the next trading idea. Inexperienced and/or unsuccessful traders get stuck in the headlights like a possum and run their loss in hope of a miracle profit. Sometimes the market will change direction and your losing trade may come right and you’ll be in profit, however this is a risky strategy and may potentially wipe your account out if you’re not careful. Instead of trading like that, decide (before you open the trade) what your maximum loss should be for that trade and stick to it.
3. Trading With High Levels of Leverage
Trading on leverage is one major advantage to CFD trading as it can quickly magnify profits, however it has an ugly sister – the one where your losses are magnified and you lose all of your money.
Each broker will offer different ranges of leverage (although the Regulators are looking to restrict this) and it’s up to you to (a) understand what leverage is and (b) decide what degree of leverage you are comfortable with.
Please avoid excessive leverage and speak to your broker about capping the leverage they can offer you to minimise losses.
4. Trading Too Frequently
This is a common problem, particularly when you’ve racked up a few losses and ‘want to get back in the game‘ or when you’re on a winning streak and think you’re invincible. Trading too frequently can cloud your judgement and turn a profitable trading account into one with significant losses. More experienced traders may have learnt the hard way in days gone by but new traders are yet to learn this lesson so stick to your trading plan and never trade for the sake of trading.
5. Trading On a ‘Hot Tip‘
We’re all guilty of this one….! Just like the horse that’s a “sure thing” that never comes in – don’t be fooled by rumours or hot tips – do your research and homework before entering a trade and never deviate from that.