Five Top Mistakes to Avoid as a Trader – Introduction
At Day Trade The World (DTTW), we have been in business for almost twenty years. During this time, we have interacted with hundreds of traders from around the world. Regularly, our teams have travelled to several countries to meet with potential customers and our customers. As such, our deep history puts us in a good place to understand the mistakes that many people do. Here are the five mistakes you should never do as a trader.
We always ask our traders to be confident in their trading. It is ridiculous to be a trader who is not confident in what you are doing. By being confident, you will be ready to buy assets that everyone is selling and vice versa. However, being overconfident is not recommended. By being overconfident, you will not be at a good place to exit trades that are not working out. Therefore, always be flexible in your trading.
- Failure to Plan
In every industry, it is very important to plan ahead. Pilots take time before flights to plan their trips. Teachers and doctors do the same. The idea about being a good planner as a trader should be obvious. In this, you should always ensure that you have a plan every morning before you start to trade. Your planning should entail important things like the risk you will be exposing yourself and also, the amount of money you are prepared to lose.
- Failure to Have a Stop Loss
As you remember, a few days ago, the global stocks market fell following the fears among the financial community that inflation was coming up. As a result, the world saw the biggest sell off in years. Investors and traders lost billions of dollars. Such market shocks will always be there. As a trader, you need to always protect your account by having a stop loss in every trade that you initiate.
- Risking too Much
This is in line with the overconfidence point I made above. As I said, it is not wrong to be confidence. But, in several occasions, you might find yourself being overconfident and risking a large percentage of your account. For example, you might find yourself risking more than 20% of your account per trade. To avoid this issue, I recommend that you set a rule of never risking more than 5% in every trade.
- Not Having a Future Plan
A while ago, two of the best oil traders closed down their funds. T Boone Pickens who made a fortune closed his fund for health reasons. It was also not doing well. Before that, Andy Hall, one of the best traders too shattered his fund for underperformance. At the same time, another Cocoa expert, Anthony Ward closed his fund following a continued streak of underperformance.
As a trader, time will come when you will need to shut down your fund. This is undesirable, but still inevitable. Therefore, it is very important for you to be prepared. You prepare by starting a culture of saving part of your income, having a separate investment account, and being responsible about your money.