Most common mistakes of a trader and how to avoid them

So far, in 2022, the biggest trading loss amounted to $8 billion. Tsingshan Holding Group faces massive losses on its short positions after its expectations for nickel prices backfired. Their main mistake was disregarding foreign forces driving up nickel prices. 

Would the trade be less devastating if Tsingshan followed the recommendations described in this article? Well, retail and institutional traders operate on different levels and play by different rules. But if you follow the recommendations below, your trading journey can become much more exciting. 

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Failing to change trade settings

Believe it or not, one of the most popular mistakes traders make is to open trades with the exact same settings as the previous one. Here is why it happens: either they open trades in the heat of the moment and simply forget, or they don’t think about customizing trade settings at all. In either case, it can lead to poor money management. 

How to avoid: When you want to open a series of trades, you need to consider each trade individually. They might be similar at first glance; but they might involve different asset classes, transaction details, durations, etc. Double-check the “Amount” field and confirm that the transaction details are correct before clicking further.

Mismanaging expiration times

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When beginners analyze the current price movement and try to predict the future trend, they often forget about the duration of the future movement. Perhaps they forget that trading is not like investing — you can’t just buy a security and wait an unspecified amount of time until it sufficiently increases in value. With trading, you need to take into about the duration of this movement of your position.

How to avoid: Just like in the previous point, don’t rush. Double-check all the fields in the settings, such as the “Time” field. Make sure the deal will end at the precise time that you want it to end.

Copying tricks for indicators and graphical analysis

There are numerous traders sharing their tricks online; they even suggest you recreate them. But these “guides” are not enough for a solid trading strategy for a couple of reasons:

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  • They have their own strict rules, strategies, full sets of indicators, and graphical tools in various combinations. You don’t see all the work these experienced traders have done, and the instructions they give don’t show the full picture. 
  • You can’t copy other traders’ strategies down to each detail and use them intuitively. 

How to avoid: Build your own strategies for different situations based on your experience and skill. Add other tricks later on when you get more comfortable in the trading environment. 

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Trying to find a strategy that “always” works

It would be incredible if you could find “the one” among all strategies and trade it till the end of time. Even if you think it’s too good to be true, too many beginners continue looking for the right winning strategy that works in every situation. 

To make things easier, you can divide your trading strategies into categories, like, for example, when you want to trade on trend and in a flat market. This way, you’ll make a clear distinction between the two and avoid a situation when you open a detrimental trending deal in a flat market. 

How to avoid: Pick your strategies only after you analyze the current market conditions. See if your approach is suitable for the asset itself and the expected market conditions in the future.

Getting FOMO

Trading FOMO is when you see a sharp rally or slump and join in on the price movement along with everybody else. You don’t need to take advantage of every opportunity that comes your way. 

Some influencers build their entire careers based on this feeling, convincing inexperienced traders that they are missing out on a once-in-a-lifetime chance. This, of course, is almost never true.

How to avoid: Remind yourself that you don’t need to be like everybody else to find success in trading. Know your goals and don’t get ahead of yourself.

Getting too excited and reckless

When you start getting your first profitable trades, it can be so exciting that you forget about the basic rules. Similarly, when you get into a losing streak, it’s easy to get emotional and toss your trading journal away.

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You can leave room for experiments and risky trades in your plan. For example, in cases when the market moves in wide, unexpected swings, your regular trading plan may not work.  But there should be rules that you don’t break, based on reasoning, analysis, and historical data.  

How to avoid: Stick to your trading plan and look at the bigger picture. Your trading journey is a marathon. One bad trading session should not wreck your account, and one good trading session should not tempt you to enter reckless, dangerous trades. 

Hopefully, you’ll only have to face these trading mistakes on paper and not in real market conditions!

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And if you want to find more tips from our financial analyst Tony, check out the video below!

Tony is a financial analyst of the Binomo team. He is a trader with many years of experience in the market. Tony is the face of our YouTube and Instagram channels and is doing everything to help traders achieve new heights.

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