How to Avoid the Top 10 Common Trading Mistakes?

Jan 14, 2021

Investing in today’s modern world can be a wonderful way to reinforce a wider portfolio or take advantage of the different forex tactics available in the market. However, due to different reasons, the stock market has changed drastically and has become more complex than ever. So, potential investors must have a thorough understanding of the market before they start trading with forex

What are the common trading mistakes, and how can an investor overcome them?

Although there are some common trading mistakes that most veteran traders can also make at some point in time, you must always ensure not to commit these mistakes regularly. Mentioned below are some of the most common trading mistakes and ways to overcome them. 

1. Not examining the market accurately.

Numerous Inexperienced traders open or close a position based on their intuition or make a random call for an outside tip. This process can sometimes bear positive results. However, it is important to find some credible evidence as opening or closing these tips positions based on your gut feelings can sometimes attract huge losses. Therefore, It is crucial to understand the direction of the market before taking a trade. 

2. Trading without a set plan.

Every trader must have a trading plan consisting of strategies that suits them best. These trading plans can help a trader to get an understanding of which strategies suit them best.

3. Over-reliance on the trading software.

Nowadays, many software companies make the trade automatically and require no participation from the trader. However, this over-reliance on software has a very negative effect as the software do not have human emotions and are not helpful in the long run.

4. Missing to cut losses.

When in a losing trade, a trader tries to hold that trade hoping that the market may come back in the green, and this misconception leads to bigger losses. To counter this problem, traders must use stop loss on their trades to exit the position timely.

5. Overexposing a trading position.

Placing all your capital on one trade can be detrimental to your portfolio because if the market does not go your way, it can result in the whole capital being sucked away. To counter this, a trader must always follow the risk to reward ratio.

6. Diversifying a portfolio too hastily.

Opening too many trades in a short time can harm the trading portfolio as more open trades means more attention. Therefore, the portfolio should not have more than necessary open positions.

7. Not comprehending leverage.

Leverage is a type of loan provided by a trader for an open position. However, more leverage means more risk and can negatively impact the capital, so it is advised not to take large leverages.

8. Not knowing the risk-reward ratio.

The risk to reward ratio must be thoroughly applied to see what percent of profit can be yielded from a trade.

9. Overconfidence after a trading profit.

After some profitable trades, a trader gets too happy, leading to distractions during trading with forex and can have drastic effects in the long run.

10. Letting emotions impair decision-making.

A trader must never be driven by emotions and should not expect anything from the market as it can affect a trader’s mindset and can result in making bad trade decisions.

To have a profitable trading career, you must always look for a reliable trading platform. Suppose you are looking for the best forex trading online platform. In that case, Enclave FX can be the ideal choice for you as they are one of the most prominent online forex trading platforms that can assist you at every step, right from opening a trading account to easy fund withdrawal.