Do you know the most common mistakes in trading that keep you from succeeding? If you believe statistics about trading, then you often read that 70-80% of all traders are not profitable (and to be honest, I think it’s 80% rather than 70%!).
There are multiple reasons for that. Especially if you are unsuccessful traders, you must seek “WHY”. It is always the market that has conspired against you. Often there are also other external circumstances that lead to failure: The political situation, bad advice from experts or often heard on commodity markets.
Hardly a person will look for the reasons for his failure in himself. That is a psychological fact. It would be advisable to start your search with yourself first.
We have put together the five most common trading mistakes that we have encountered again and again in our environment.
5 Deadly Mistakes A Trader Make
Do you already know the most common reasons why traders are not profitable? We have compiled the 5 most serious mistakes that we encounter again and again. And let’s go:
#1: No serious preparation – No rules – No strategy – Get started right away without seriously dealing with the topic
This is the first and the most common mistake made by many prospective traders: low entry barriers and beautiful advertising that suggest large profits entice many prospective traders to trade on the stock market far too early and without any preparation. We also don’t get into a car without a driver’s license or without being able to drive and believe that we will arrive safely. Opening a trading account and depositing money is easy. However, investing the money requires extensive knowledge.
Before starting, you should deal with the matter thoroughly. We, too, were budding traders and therefore know from our own experience how many different topics, offers, seminars and books there are on the subject of the stock market. Keeping an overview is difficult.
Our tip: only pay attention to offers in which, in addition to the theory, also attach great importance to the practical part, support you in the long term and accompany you until you become a successful trader.
#2: Switching from demo to real money trading too quickly – Too little experience and confidence in the strategy
Once you have built up solid knowledge and learned a strategy, you want to plunge into the deep water as quickly as possible. However, just as pilots do not take off from the ground straight away but practice many hours on the flight simulator beforehand, we too have to proceed in trading.
Certainly practice is important and demo trading does not make you feel the emotional burden that you have in real money trading . However, the demo operation should be continued until you have gone through each market phase several times and can show stable profits on the demo account. This builds trust in the strategy and in trading. Possible errors are recognized in good time and, in the best case, eliminated. It’s always good to make “free” mistakes!
Not every situation can be simulated, the market is constantly changing. Nobody knows where the market will go. Neither do we, of course. But trading is not about a glass ball that shows us the future. It is about controlled risks and continuously making profits from the market. Only when you have managed to do this on a demo account over a longer period of time, you can start trading with real money then.
#3: No in-depth knowledge of robust risk and money management
This is also no wonder, because this does not seem to be a focus for many coaches. Talking about getting in and out is much more exciting. But one of the most important keys to success is risk and money management .
A trading system can be ordinary. However, if money management is good, trading can still be profitable. And vice versa: Even if you have THE BEST trading system, you can make big losses without proper money management.
A good strategy paired with good risk and money management is all the more successful. Typical mistakes are:
- Too high a risk
- Put everything on one card
- Lack of diversification
- Cluster risk in the portfolio
- Incorrect assumptions
Our tip: Only deal with trading approaches that give reliable growth.
#4: Losing focus
A very common mistake in trading is jumping from one trading approach to the next.
None of the strategies are thoroughly worked out, tested and applied. Instead, you quench your curiosity, try a little, and jump to the next topic. The result is that you have been going around in circles for years without any significant progress. Do you know that?
Our tip: Don’t swap your strategy every time a losing trade occurs. Draw downs are part of trading and will be part of every strategy. See it this way:
If you drive from Mumbai to stretchy streets by car, you will certainly get caught in a traffic jam every now and then. If you leave the motorway every time and look for new routes, you may get lost, make a detour and arrive much later than if you had simply accepted the traffic jam and stayed on your way.
Always keep your focus. If necessary, reduce the speed and your risks, switch back to demo trading from time to time, look for comparable situations in the past, test and analyze your trading. If you feel that you need to optimize the strategy, then only change your rules in very small and well thought-out steps. Make a note of every change, including thoughts and meaningfulness, in your trading journal and test it both with historical data and on a demo account.
#5: Neglect of education and training
Have you mastered all the challenges and are you continuously earning money with your strategy? Then the next danger is already lurking for you.
Many traders neglect training believing they can already trade. Your performance may prove you are right at the moment, but this is only ever a snapshot. The more intensively you learn, the more robust your own trading will be and the more continuously the performance will increase. And this even in difficult market phases. Practice creates masters. Anyone who wants to earn money with trading in the long term should have the right to become an absolute expert in the field themselves.
This includes:
Do historical tests (i.e. back tests) (and many pilots continue to train in parallel on the flight simulator despite a flight permit in order to be prepared for as many situations as possible, a successful trader continues to train with historical tests or demo trading although he is already making money.)
Evaluate your own trades and identify possible errors; constant evaluation of your own trades prevents possible errors from creeping in, or recognizes them in good time, so that you can make a good growth out of it.
Recognize weaknesses of the strategy and continuously work on them; “only those who know their weaknesses will be able to use their strengths to their full extent” a quote from the internet. Know the strengths and weaknesses of your strategy in order to know when to give full throttle and when to step back.
Look for further patterns and techniques within the trading logic. Our experience shows: if you remain curious, you will develop new sides and angles of the strategy with an increasing understanding of the markets. This results in new techniques and patterns that make the strategy overall even more powerful and profitable.
Conclusion
These were the 5 most deadly mistakes in trading that we ourselves and new traders make again and again. If you have experience with other errors, please write us a comment. That would really interest me, because the more mistakes we uncover, the more robust the trading can become.
