The description of the trading process can be put into one sentence: the market participant predicts the further movement of the price in order to benefit from a properly open position. It sounds simple and simple, and the task is, like, not so hard. However, at the beginning of the way traders often confuse trade and game – here the same bets, if you guessed, then took the prize. Perhaps only the trade in binary options can be attributed to the game, where participants need to precisely guess the subsequent movement of the price.
Beginners make a lot of mistakes, and two factors that never change:
- Incompetence. You’ve definitely heard stories from people who left an apartment on the market that financial markets are a fraud. They don’t make money, they lose money. But these people didn’t think that the threshold for entering the financial market was very high, the prospective trader would have to go through a lot of information to learn how to make a living. A doctor cannot be a doctor if he has not completed his studies and has not received a diploma. Why people have decided that things are different here is not clear. Yeah, you don’t have to go to university, but self-development is important.
- Emotions or psychological instability. Emotions are very disruptive to trade, as everyone says everywhere. For example, you have a long position, the green candle on the graph continues to grow, but by all accounts, there will be a price turn soon that can significantly reduce your profit. It seems that there is nothing complicated here, take and close the position. But in fact, young traders sit and wait for more profit, risking being left with nothing.
In this material we will analyze the five main errors of the beginner trader and try to understand how to avoid them.
High expectations
For people, traders look like successful people who buy beautiful houses and cars, are surrounded by luxury women and do not think of problems, they are traders. But that’s not always the case.
There are times when people get into financial markets because of successful traders who say there’s a lot to make here. That’s what attracts beginners.
No matter how a person learns about the financial markets, the result will be the same: after starting trading, such results will not be accurate. It is more likely that a newcomer to the market will suffer losses during the first transactions, but I want to reassure you – this is absolutely normal. In the early stages, a young trader encounters a harsh reality: they promised a different result, how can they? In the first case, the «super trader» himself never had a profit of 1000% and tells the stories only for you to buy access to his paid channel/teaching material/giving money to trust management and others. In the second case, the trader has many years of trading, hence the experience and sufficient knowledge of the market.
Remember, if in your first year of trading you have managed not to lose your deposit, then huge progress has already been made. And if you’ve earned a few percent, you should know that this is not a result that every newcomer can boast.
The trading system and its absence
To begin with, the trading system is mandatory for every market member. It’s the way you can fight emotions that impede trade. The trading system can be designed on its own, but newcomers are discouraged because of lack of market knowledge. It is better to borrow the finished system from experienced traders, which are many on the wide area of the network.
To be useful, the trading system must include the following:
- Trading should take place according to one of three scenarios: on trend, against trend, and on patterns. If all this is mixed, then the trading system is not quite correct.
- A certain percentage must be allocated for each opening transaction.
- Set deadlines: how much you can afford to keep the deal open.
- Define the risks. This implies the choice of the credit lever and the amount of the deposit that will be required to secure the margin in this item.
- Logins and exits from transactions. You have to think about these things in the first place.
By choosing the right strategy, you will rid your trade process of chaos. In return, you will have a fully optimized trading process that avoids the sudden opening and closing of transactions, the allocation of different amounts of funds to each transaction and other.
Discipline
The human being is lazy. And when you start your trading career, it’s very hard to get used to the fact that you’re your own boss. People start to think, what if I get up today and start trading a little later, because no one will say anything to me, and the outcome doesn’t change.
The problem here is that if you find the best trading system, you can’t profit from it until you discipline yourself.
Money management
Initially, it may seem that a trading strategy solves all your problems in trading and you can think of nothing else. However, the moment of capital management has to be considered separately, as it is one of the most important parts of the right trading.
There are several basic rules in capital management:
- How much you are willing to lose. We are talking about losses for a day, a week or a month.
- The resulting profit is better not to withdraw completely. We recommend that you do as many traders do, withdraw 50% of the profit, and leave 50% on the account.
- Always withdraw a percentage of the profit from the trading account. You must see and understand your earnings in order to be motivated to continue successful trading.
By following these simple rules, you will be able to profit more from trade than without capital management.
Emotional state
Often, people make rash decisions when their emotional state is unstable. In trade, this moment is also important, because when a trader is emotional, the consequences can be quite dire. The emotional balance can be undermined both by a loss-making transaction and by circumstances outside of trade. For example:
- The trader may simply fall ill, which will not make his physical state stable, but along with him emotional. It is better to leave trade and concentrate on restoring one’s health than to trade in such a state.
- In the initial stages, every open transaction will be accompanied by doubt and uncertainty. In time, it will all go away, but it will take a lot of effort to get rid of those feelings.
- In the life of every trader, there is a streak of losing trades. The correct solution is to stop trading for a while to get your emotions in order and return to trading with a cool head.
If you are in one of the situations described above, the best solution is to abstain from trading and have a good rest.
Conclusion
There may be many problems for beginners, but most are solved easily. The main thing to consider is the availability of market knowledge, which can be easily found on the network. If you neglect them, you won’t have to wait long to drain the entire deposit.