6 typical mistakes of beginner traders through the eyes of a professional

In recent years, there are more and more people who want to try their hand as an investor in various financial markets, including FOREX market. But, nevertheless, despite the emergence of new teaching methods, and the increase in the professional level of teachers themselves, I can't help noticing that the most common mistakes of novice traders are passed on from year to year. In this article I want to analyze in detail what prevents new traders-investors to become successful at last. And to give some advice based on my life experience.

Mistake 1: Lack of Knowledge

So, let's start from the beginning. The first and most important mistake: the lack of necessary knowledge base - a person starts trading after superficial training or without any training at all. It is almost impossible to get trading skills from books. As well-known psychologist, trader and author of many best-selling books for beginners Dr. Alexander Elder well noted, one studies to be a pilot or a surgeon for several years, then takes test flights or operations under the guidance of an experienced coach, and only then, very carefully proceeds to work by oneself. No one thinks that it is possible to fly a plane or perform surgeries by reading a detailed manual. Why, then, do the vast majority of beginners feel differently about working in the stock market?

It's best to first learn all the nuances of working directly with a practitioner, followed by a period of trial trading on a demo or small real account under the guidance of an experienced mentor, and only then follows a careful work in compliance with all the recommendations on a real account. It's also important to understand that to demo accountIf you choose it, you have to treat it as if it were already real.

Mistake 2: Overconfidence

The second mistake of a beginning trader: excessive haste and self-confidence. According to dealing cents statistics, in the first two months they earn 80%, but in the third-fourth month almost all of them lose the initial capital. Why does this happen?

Let's take the example of learning to drive. After receiving the license, the first time a former pupil, and now a full-fledged driver tries to drive very carefully, observing all the rules of the road, but in two or three months you do not recognize him. He is no longer interested in signs, it seems to him that he mastered the methods of driving and knows them "like the back of his hand", and that is where trouble awaits him. According to statistics, the majority of accidents happen exactly during the first 4-5 months, with the peak occurring at the end of this period. The same applies to work in the stock market. The rules of safe trade must be observed in a year or two, they do not change.

Mistake 3: Intraday trading

The third mistake: trying to start trading with daytrading, that is, working intraday on short-term charts, mistakenly thinking that you can make a lot of money that way. In fact, this is a myth, of course.

Only professionals with many years of experience and who can make decisions instantly, and not so much on the basis of market analysis as on their own intuition and rich life experience, are successfully engaged in daytrading. If these components are missing, success is virtually impossible.

I recommend beginners to work on the basis of the technical and fundamental analysis of the end of day, that is, from the medium-term position trading on daily charts.

Mistake 4: Working against the trend

The fourth and most common mistake is working against the trend. 50% beginners lose their initial deposit for this very reason.

There's a good rule: You can never be too expensive to buy and too cheap to sell.

You don't have to think you're the smartest, you have to blend in with the crowd. It is not for nothing that there is an English saying trend is your frend. The trend is your friend - as long as you have it, you should go with the flow.

Mistake 5: Preoccupation with the Markets Guru

The fifth mistake - excessive trust in various kinds of indicators, mechanical trading systems, analysts, including gurus of financial markets.

Remember, the decision is yours and yours alone. It is your money, and if you lose it based on the recommendations of the above-mentioned assistants, none of them will take responsibility for your losses. In addition, when making transactions on the basis of your own analysis, you are gaining invaluable experience, which will definitely be useful to you in the future.

Mistake 6: Trading without a plan

And finally, the sixth and final mistake of a beginning trader is the lack of a clear trading plan and own strategy. You must know what to do at any moment, no matter how the market behaves. For that purpose, especially for beginners, you must keep a trader's diary, where you have to describe your actions:

1. Date and time of compilation;
2. The name of the instrument for which a trading plan is made;
3. The reason for choosing the tool;
4. The point of entry into the market (buy, sell) with a comment, on what basis it is chosen;
5. The loss limiting point is StopLoss;
6. Точка выхода из рынка с максимальной прибылью — Take Profit;
7. Comment after fixing a profit or loss.

It is very important to observe the profit/loss ratio of at least 2 to 1 when choosing a position to enter the market, and in general, the more the better. Then the mathematical ratio of profit expectations will be positive.

Compliance with all of the above rules and avoiding mistakes will not only allow novice traders to avoid losing their first deposits, but also to start earning immediately in any financial markets, including .

Good luck in the trade.

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