Imagine a situation: all traders, regardless of trading goals, deposit size and type of trading asset, began to act correctly: use only profitable strategies, follow the rules of money management, control emotions. What then will be?
The correct answer – anything. The price will not change, losses will disappear, and, as a result, there will be no capital flow.
I give it for what it’s worth. Of course, the large exchange deals supporting the banking and industrial sector will remain, but those speculative impulses and trends on which all got used to earning will not be. Therefore, mistakes of the trader not only are inevitable and are even necessary – without them, there is no market.
The article will be useful to all participants of the financial market: to traders, investors, analysts and just interesting matter. It is important to understand at once that everything described further surely is present at any trade, only with different consequences for the capital. The most often found mistakes can be divided into three groups:
As well as in any business, most of the failures in trade are connected with psychology, therefore it is important as soon as possible to learn to control itself, otherwise reliability of transactions will remain at a low level.
So, main problems:
- Unjustified «self-confidence» because of a lack of knowledge
These are situations when experience is tried to be replaced with self-belief, and continuous training and work – obstinacy. Only the market is not interested in all that and such players are thrown overboard after losing the first deposit.
Decision: we do not stop process of training and studying of the market: we watch behavior an asset; we test the ideas for a demo account before obtaining stable results.
- Frequent transactions with the minimum profit
Usually, with it the scalpers opening tens, and sometimes and hundreds of transactions in a day in, that pleases the broker who is steadily receiving the bribe and inhabitants who see sign of work in such feverish activity. In addition, here medium-term traders who monitor positions 1-2 times a day on this background look just idlers. But actually medium-term trade gives a stable and quiet profit.
Decision: we open transactions only on strong signals, we miss market «noise», we do not put too close StopLoss, and we use advisers only after careful testing. You should not feed the broker with the commissions and spreads once again!
- The constant fear of a loss
Here finish the trade most new traders. If it is impossible to force itself to open the transaction even if everything indicates it, we receive a vicious circle:
“Lack of confidence”=>“ No transactions ”=>“ any result ”=>“ It is impossible to understand what the problem is”
And without a positive result, there is no opportunity to attract investors and reach a new level.
Decision: we train positive motivation, reduce profit targets to reasonable limits, start real trading with cent accounts. If you still cannot cope with the nerves − go to the medium-term and long-term strategies. It may be worth moving into the category of investors or choose another field of activity.
- Excessive reliance on external signals and “copyright” strategies
It is difficult to resist the temptation to use someone else’s, but already “proven supermethod”, even if it costs decent money. The same applies to the forecasts of “leading analysts” for which they do not bear any personal responsibility. The result is predictable − losses and losses again.
Decision: trust only the results of your own analysis, critically evaluate external analytics, news, recommendations, and especially signals. Remember that bluffing skillfully launched onto the market is also an important element of professional trading. If you still decide to use external recommendations, such as vfxAlert signals, use them only as confirmation of your ideas.
- Pathological desire to return quickly losses: classical situation of the overestimated ambitions – begins chaotic opening of new transactions, especially on binary options, with their bright, “big CALL/PUT buttons”. No analysis at the same time naturally is carried out and only zero on the trading account can stop this nonsense.
Decision: it is necessary to have courage to recognize own misses and to accept losses. You WORK, but do not wage personal war with market makers, which nobody will estimate. If the first signs of “game addiction” are observed, we stop trade and we ask for psychological assistance.
- Lack of emotional control: for 100% it is possible to avoid losses only in one way – not to trade in general. Mistakes are inevitable; the main thing – to understand their reasons, not to repeat in future transactions and not to worry about what already occurred.
Decision: risk only that sum which will allow to remain “in the market” as long as possible and to quietly compensate losses. Make to the trade plan (day, week and month) and rigidly observe it, without being distracted by emotions. You watch over health: do not use antidepressants, provide good rest after the end of a trading session.
Trading strategy errors
Immediately, we note that the options “trading without strategy” is not even considered, despite the abundance on the Internet of “intuitive trading” supermethod. But if after a lucrative period loss began, the following problems are most likely:
- Insufficient testing and a small average profit: we change conditions and conduct a new testing cycle. If with any change only a negative result − look for another strategy.
- The constant complication of the rules for opening a deal: for beginners, it seems that the constant addition of new conditions in the vehicle increases the reliability of signals. In reality, this is not so: the indicators are beginning to duplicate each other, they may well give a false signal or, in anticipation of the fulfilment of all the conditions, skip several lucrative deals.
- Failure to understand the characteristics and rules of the vehicle: serious strategies usually follow detailed instructions that, as a rule, no one read. And how wrong I was! There you can find a lot of useful information about recommended assets, optimal parameters for each trading session, conditions of entry/exit and termination of trading.
- Important: Frequent change or simultaneous use of several strategies usually leads only to uncontrolled losses, the cause of which is difficult to understand.
Errors of the trading process
- Transactions against the trend. One of the main problems of beginners who, due to lack of experience, begin to consider themselves smarter than everyone does. Losses are overstayed in the firm belief that “now” the market will unfold, and profits are already in your pocket. The reality, as a rule, does not meet expectations − the market moves on, leaving the novice with an empty deposit and related psychological problems.
Decision: It is possible that professionals with many years of experience and large deposits can afford to play against the trend, but if this is not the case, we open ourselves only in the current direction. We did not create a trend and we did not stop it.
- Opening deals at the end of the trend: the second mistake is trading with the trend. Entering the market is too late, the potential profit until the turnaround does not justify the risk.
Decision: Strong knowledge and confident technical analysis skills, taking into account the characteristics of a trading asset.
- Inattention to the dynamics of market volumes: all attention is focused on price and the confirmation from volume indicators is missing. As a result, an erroneous entry is possible in a speculative move.
Decision: We open the purchase only when the bull trend is confirmed by the growth of volumes and the breakdown of strong resistance levels. Sales conditions require the opposite.
- Money management problems: а lot of textbooks and training courses say about risk control, but as a rule, in the pursuit of profit, traders forget about this as “stable”. Losses make you return to this question.
Decision: Carefully calculate the parameters of each transaction, without making exceptions. The market is constantly changing and each entry point is unique.
- Inefficient organization of the working day: Eliminate the factors that hinder concentration and do not change the established regime unless necessary. Trade-in inadequate conditions are excluded: severe stress, illness, alcohol.
- A series of losing trades with the right strategy. If this is not related to trading strategy problems, it is recommended to simply skip the current trading day. The common stereotype that it is necessary to “work”, despite everything, is unacceptable for trading − we get to profit from the right decisions, and not from the process itself.
- Problems with computer equipment and Internet access: it is necessary, at least, double reservation of Internet access channels and equipment. This is especially important when there is automatic trading or scalping, requiring the most rapid processing of transactions.
Let us summarize. As you can see, the main reason for unprofitable trade is the fear of financial losses, as well as the lack of knowledge about the market and methods of its analysis. But on the other hand, they learn from mistakes, and especially effectively, from personal losses. This is the most valuable experience and, if you draw the right conclusions, then you can go from a beginner to a professional faster. And it will cost less.