BIGGEST TRADING MISTAKES YOU MUST KNOW

While some trading mistakes are unavoidable, it is important that you don’t make a habit of them and learn from both successful and unsuccessful positions. With that in mind, these are the 10 most common trading mistakes.

1 - Not researching the markets properly
Some traders will open or close a position on a gut feeling, or because they have heard a tip.
It is important to back these feelings or tips up with evidence and market research before committing to opening or closing a position.

2 - Trading without a plan

3 - Over-reliance on indicators

4 - Failing to cut losses
The temptation to let losing trades run in the hope that the market turns can be a grave error, and failing to cut losses can wipe out any profits a trader may have made elsewhere.

5 - Overexposing a position

6 - Overdiversifying a portfolio too quickly
While diversifying a trading portfolio can act as a hedge in case one asset’s value declines, it can be unwise to open too many positions in a short amount of time.

7 - Not understanding leverage

8 - Not understanding the risk-reward ratio
The risk-to-reward ratio is something every trader should take into consideration, as it helps them decide whether the end profit is worth the possible risk of losing capital.

9 - Overconfidence after a profit

10 - Letting emotions impair decision-making
Emotional trading is not smart trading. Emotions, such as excitement after a good day or despair after a bad day, could cloud decision-making and lead traders to deviate from their plan.

Every trader makes mistakes, and the examples covered in this article don’t need to be the end of your trading. However, they should be taken as opportunities to learn what works and what doesn’t work for you.