While great traders make trading look very easy, for most of us it is not as easy as it seems. It requires a lot of knowledge and experience that cannot be achieved so easily. The most encouraging news is that many successful traders learned the trade by themselves without stepping into a trading classroom. Many people tell you how they lost a small fortune before making it big in the trade.
While you cannot substitute anything for experience, it is always a good idea to get first hand information and hands own experience for trading. Fortunately, we all learn from the mistakes that those before us have made. Let us look at the fatal mistakes that you can make, but which you should avoid.
Chasing what is Popular
Going after a trade just because it is touted to be popular ends up being a wild goose chase. You chase the trade all over the place praying that it makes a move, only for it to go the other way, along with your savings! Instead, you need to trade based on fasts. Focus on signals and not emotions or impulse.
Using “Scared Money”
What kind of money are you trading with? Are you using your life savings or your retirement fund? What happens when you lose the trade? Do you have a plan to fall back on? The golden rule of trading successfully is never to trade money that you can’t afford to lose. You need to trade confidently, something that you cannot do when you are scared of losing.
Holding on to a trade that is going the other way is one of the dumbest ideas ever. You cannot blame yourself, because many traders have this mentality that if they believe in stock it works out the right way. The only problem is that many people hold onto a losing stock way longer than they should. This is why it is vital to set entry and exit points. Well, accept the reality, cut your losses and run on to the next trade. Extremely seriously, the more you hold on the more you stand to lose.
There are a few ways to lose money when you place trades. Chasing what is popular is a big mistake because you end up believing in what might not work at all. You should also spend money that you can afford to lose.