Losing is an essential part of trading: all traders, even the most successful ones, lose money from time to time! However, when you lose more than you win it is time to review your trading strategy and make the necessary adjustments. Learn what may be wrong with your strategy and approach to trading by reading this article.
Trading without a plan
You have to carve out your trading strategy before you enter the deal. When the deal is open it is already too late to develop a strategy as you are quite likely to act emotionally and irrationally.
Instead of trading based on your gut feeling, you could trade according to a well-defined plan. You may have heard that professional traders feel the market and sometimes make intuitive decisions (which is true). Suchlike behavior requires years of experience. In fact, most professional traders would never become successful should they have started trading according to their gut feeling from the very beginning.
Poor trading discipline
It is not only important to have a distinct trading strategy, it is also important to trade in accordance with one. Having a trading plan but failing to trade along with it won’t help. Once you’ve determined entry and exit conditions, optimal investment amount and leverage, you have to play by your own rules.
Failing to adapt
Markets can boast elusive and ever-changing nature. Ignoring this fact and failing to change the strategy you use to new market conditions can result in a failure. When one thing stops working it is wise to try something different instead of trying to do it over and over again. On the other hand, it is not always wise to change one’s trading approach too often. Finding the right balance between the two can be tricky, yet it is absolutely essential.
Having unrealistic expectations
Trading is not about getting rich fast. Trading is about hard work, education and small, yet steady gains and managing risks. The sooner you get rid of unrealistic expectations, the sooner you will find yourself in the position to make real progress.
Poor risk management
It has been stated more than once (in this blog, as well) that risk management is arguably the most important aspect of trading. You, as a trader, first have to learn how to manage your risks before developing your trading strategies. The reason for that is simple: no one can trade when his account is sitting at zero. Please remember that high leverage is an additional risk factor.
Learning through trial and error
Learning through trial and error could be a good thing when trading on a demo account. Feel free to test all the necessary trading tricks, tactics and strategies when there is no real money at stake. You can learn from other people’s experience and professional literature before allocating your own funds to certain strategies.
When you know what the most common trading mistakes are you get a chance to avoid them. Without knowing what you do wrong it is virtually impossible to improve your results. Try to avoid six fallacies you’ve read about today to improve your trading strategies.