The most frequent pitfalls of trading
Starting out on the trading path involves different challenges and obstacles. Beginners tend to jump right into the action and might, inadvertently, handicap themselves from the get-go. There are five common mistakes new traders tend to make time and again. With this heads-up you can avoid them altogether and gain a better understanding of what it takes to be a successful trader.
Skipping Trading 101
First things first, many traders don’t get to know the main market terminology and what currencies, stocks and indexes actually represent. Read up on them and choose the ones you feel most comfortable trading with. Having done so, you can understand the opportunities the Trading 212 PRO platform has to offer and you can take better advantage of them. Knowing the meaning and significance of margin calls, stop loss etc., can take some time but prevents basic mistakes later on.
Running before walking
After covering these fundamentals, you have to get to know your selected platform, preferably with a practice account. This allows you to acquaint yourself with its layout and also dry-test your strategies. With Trading 212, you can start with 10k virtual euro and, in case you lose them, the sum can be reset so that you can continue mastering the functionalities and go through some learning errors. After you get familiar with the platform, you should switch to a real account which lets you taste the action and experience the real emotions actual trading brings. This will allow you to begin training on the ground and improve your psychological reactions to the actual ups and downs of the market.
Letting emotions rule
Some fascinating studies show that people with psychopathic traits make great traders (that’s functional psychopaths, not serial killers). The explanation: being cool and laser-focused when the markets are hot is crucial if you are to stay disciplined and stick to your trading strategy. We humans can be very irrational, especially when the adrenaline rush hijacks our brain.
Trading for the sake of trading
Traders have to also be aware that the market has its own dynamics and internal clock and just because you want to trade “now” doesn’t necessarily mean that you should. Don’t trade for the sake of trading because before you know it, your money will be gone. Knowing when the market presents suitable circumstances is like being a sniper. Biding your time and only pulling the trigger when the conditions are perfect.
Going with the crowd
This challenge is not limited to new traders – group mentality, blindly following the majority of tipsters, analysts and experts that are in vogue right now. The one thing a good trader has to have is a critical mind. The “joy of going against the herd” as one the most famous traders of all time – George Soros – puts it. In the 24/7 news cycle, you’ll always have contradicting statements and predictions. Think for yourself and trade for yourself.
Even if you do make some of these mistakes, you shouldn’t be discouraged. As previously mentioned, they are quite common but can be avoided with a bit of targeted effort in the right direction.