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October 26, 2018

Trading: 4 Fatal Mistakes Made by Beginners

To say that the trading industry has developed over the last few years would be a complete undersell. If we were to glance at the industry over history, it would quickly become apparent that this was something that was only really dabbled in by professionals. Now, it's been opened up to everyone.
The likes of MT4 for Mac has changed the outlook on trading; the fact that software such as this permits personal accounts says it all.
Of course, now that trading has been opened up to more people, with perhaps less experience, the mistakes are being intensified. This is the reason behind today's post, as we take a look at the biggest four mistakes that are typically made by those who are new to trading.
Mistake #1 - You bounce from market to market
When you are starting out, it can be hard to resist some markets. In other words, you want a slice of everything. One day you might be looking at stocks, while the next you might be turning to currency.
The problem is, you are in no such position to bounce from market to market like this. If you do, you aren't doing it with a professional hat on - you are doing it as an amateur who has little knowledge of each of these markets. It is better to specialize in a market, get to know the ins and outs, before then trading in other markets once you have mastered it.
Mistake #2 - Holding onto losses
Sometimes, you have to accept a loss. Again, for a beginner at least, this can be quite hard to stomach. The best traders in the world know exactly when to cut their losses. Sure, they might make a loss if they sell an option now, but it's going to be a much smaller loss than if they had waited in an effort to try and claw back a profit.
This is something that will come with experience, but in the early days be wary that you don't fall into such a trap.
Mistake #3 - You don't trade with a plan
Again, you are new to the business and as such, you need a plan of attack. Even if you were to question some of the most experienced traders in the world, you would find that they have some sort of plan. They know when they are going to enter a market and perhaps more importantly, they also know when they will exit it.
A similar mistake is abandoning a plan. As we have already alluded to, losses can occur in this business, but don't jump ship at the earliest opportunity. Chances are, a plan needs time, and throwing the towel in too early won't bode for any future success.
Mistake #4 - You follow tips
Finally, trading should be about calculated transactions. It shouldn't be about following someone else's lead, or taking action after hearing about a “golden” stock opportunity.
Sure, you might be made aware of such information, but you should assess it before you act. 
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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