Hello traders and market enthusiasts,
In my long career as a Forex trader and educator, I have worked together closely with different types of traders who vary widely in their behavior, character and views. However, despite all of their differences, I did notice a stunning observation: the behavioral pattern and the most common occurring mistakes were very similar for a majority of the traders. Most traders in fact encounter very similar problems and obstacles in their path to successful and profitable trading. Logically, many small personal differences do exist and those are, beyond any doubt, very important to observe and realize. Writing down one's own strengths and weaknesses might be a good way to start. However, in the grand scheme of it all, there do tend to be similar areas where traders struggle. And with that said, I present a list of the top 3 most commonly made mistakes in trading. These 3 are interchangeable and are not sequenced in any rank or order of importance.
Chasing the market
A recurrent problem for traders is their desire to trade often and frequently: these traders are chasing the market. In such a scenario the trader will not assess whether the current market conditions are suitable for trading. No, in these cases, a trade is entered solely on the premises that a trader is in need of a trade due to their own emotional status at that particular time. Emotions are the prime disruptor of a balanced mental state in trading the markets. Without a stable trading psychology success remains a far distant dream. Remaining patient, calm, and disciplined are crucial elements in order for anyone to thrive in the world of trading.
In most cases this behavior is displayed during big market movements when price tends to trend for a long distance. Often enough, due to frustrations of missing potential profit and feelings of regret, a trader would enter a trade very late in the hope of joining the dramatic price movements and compensating the profits they have virtually missed. This type of emotionally driven market analysis is a recipe for disaster. Seasoned traders do not chase the market, they patiently wait for the best market conditions to appear and then execute their plan as designed. The market must confirm their views, methods and entries – not the other way around. They realize that they cannot control the price movement of the market, but they can control their approach to the market. That is the formula to success.
Trading as a business
In that juncture it would be prudent to explain another frequently made mistake by traders. Trading must be approached as a business to enable long-term consistent success. Traders should always avoid trading without a plan and must fully prepare themselves before approaching the market. Preparation is more than half the battle.
Many a trader is not aware of the dynamics needed when approaching trading. Not only will an entry strategy or analysis of the market suffice to become a profitable trader, the trader must also be adequately prepared in many other terrains as well. For example, traders should have rules and guidelines drawn up for areas such as money management and risk management as well, where it is vital to reduce the potential loss of any trade to the minimum.
Not choosing a mentor
Last but not least, I would need to mention one of the most stunning observations I have yet discovered in my trading profession: many traders do not realize the importance of having a mentor. Ironically enough, almost all of the basic and common mistakes made by traders can be easily avoided under leadership of a mentor. These mentors have succeeded in their quest of becoming a profitable trader and are able to guide the less experienced once in their path to success. These experienced traders know that the route to success is rocky, dangerous and with pitfalls. However, with their support, the goal of becoming a trading master is in vision and within reach.
One of the ways a trader can benefit from a mentor is via a live trading webinar. In this online seminar a mentor, such as myself, views the markets not after the fact but in a live market environment. I myself provide such a live trading "room" as well. Here I analyze the market conditions and explain the viewers how and when I would trade that particular instrument. This is fantastic short cut in learning the art of trading and technical analysis. The biggest bonus is that the online sessions are completely free with binary.com, previously BetOnMarkets, every Monday morning at 7am UK time. In this short (20 minutes) but to the point and powerful webinar, we examine the charts of the Forex market and Gold in order to analyze and identify the most likely scenarios in the upcoming week(s). I look forward to seeing you in the room and wish you all Good Trading.
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