This is the forth article by #BitForex of a series of articles we are making available to those who want to learn more about Blockchain, the crypto-world and trading. Our last article was about ‘How Much Money A Trader Makes’. Today we compiled the top 8 newbies’ mistakes in trading. We hope you`ll enjoy it!
Trading attracts more and more people every year. This is shown by the constantly growing market turnover, which is already billions of US dollars per day.
Trading is available for everyone, you just need to register an account on one of the exchanges available (if you don’t know how to choose the right exchange, please read our second article, where we explain what a good exchange must offer and what difficulties can a novice experience on choosing a suitable exchange: https://steemit.com/blockchain/@bitforexcom/how-to-choose-a-good-crypto-exchange )
However, there are a lot of negative comments in the internet from newbies about trading. This is since unexperienced traders end up losing their funds too fast due to making different kinds of mistake. Let’s find out what mistakes a beginner trader usually makes.
Mistake №1 - “Stop Loss” and “Take profit”.
When traders opens a new order/position, they have some trading tools available to them, such as “Stop Loss” and “Take Profit” options. These tools help decrease trading risks/loss and increase trading efficiency..
In general, beginners dont use this tools. They usually dont know how to use them or underrate them, not knowing how helpful they can be.
For example, a trader just opened an order and then left his work-place and went to bed. After a few hours the scenario on the market may change to a negative direction. If the trader opened a ‘buy position’ and the rate of whatever he bought drops considerably, he may lose all of his funds.
To prevent traders from such negative incidents, experienced traders always use “Stop Loss” function, which automatically closes positions when the price drops below the ‘Stop Loss’ assigned value.
Mistake №2 – Have always an open order.
One of the most common newbies trader’s mistakes is thinking that they must always have an open position. Which means, as soon as they close a position, they immediately open another without checking the market.
If traders expect further growth of the exchange rate (if they’re trading on currency for example), it doesn`t make any sense to close one order and open the next one straight away, because even if the rate rises, they may still face capital loss.
Mistake №3 - Counter-trend trade
Another common mistake is counter-trend trade. Novice trades may think that after sharp price increase, the trade chart may return to the previous position. Yes, indeed, the trend reverses sometimes, but there are certain reasons for that to happen, and this does not happen as often as beginners would like.
It is very important to understand that trend is determined by supply and demand. If other traders are continuously buying gold, for example, then the price will not suddenly revert. Thats why we recommend newbies to follow the trend and dont try to find the moment the market will revert. This kind of strategy is useful if you only have inside information or years of experience, but the risk is still high.
Mistake №4 – The use and abuse of leverage.
Some exchanges, including #BitForex, have the option to set leverage value. The maximum size of leverage can be from 1:100 to 1:200, it depends on the coin you are trading on. This tool allows you to increase profits, in case of successful transaction.
However, don`t always set the trading leverage to its maximum values. The fact is, the more you increase the leverage value, the higher are the risks of loss. If the rate is lowered/increased to a critical level, the order will be closed automatically, and you may lose all your investment.
If you are not sure about how to use the leverage tool, it is best to do spot trading so that you minimize possible losses.
Mistake №5 - Every order must be profitable.
Novice traders more often than not, will never close a position when it is at a loss.
The most important is to keep a consistency in trading profits. Sometimes we win, sometimes we lose.
It is better to withdraw trading profits after a certain number of successful and unsuccessful transactions, then after each profitable trading activity. The goal of most traders is to have a constant income from trading. (If you want to learn how much a trader actually earns, please read our previous article. There we explain it in a very simple way. - https://steemit.com/blockchain/@bitforexcom/how-much-money-a-trader-makes )
One single loss is not the end of the world. Thats why if you got a bad luck dont let bad feelings up inside of you, dont get tilted and dont give up. Take a break, may be go for a walk little bit and back to the work with fresh mind.
Mistake №6 – Lack of money management
It is very important for every trader (and not only for novice traders) to manage its money correctly. If a person doesn`t know how to manage their capital, it is very hard to be successful pretty much at anything. You should trade only what you can live without, otherwise fear of lose everything will not let you make a right decision. For successful trading you must first create a “financial pillow” so that you can assign part of your capital to trading without risking losing everything.
Mistake №7 – The use of only one trading strategy
The market is everchanging. Every coin on the exchange represents a completely different market. That`s why you must change your trading strategies from time to time. Traders can get excellent results in a trendy market with one strategy. But if market switches to flat, for example, a set strategy may no longer work. For successful trading, you need to understand market movement and adjust to them.
Mistake №8 - Excessive reliance on independent analysts
Trading today is one of the most promising ways of making money, but as an every-single business, it requires immersion in work, putting in effort and choosing the right tools. If the advice from analysts were always providing great result to traders, every single trader would have earned millions in trading. Of course, you can read analytical materials and reviews, but only for collecting information, not to be used as rules.
You must make your decisions only by yourself! This is the only way to gain experience and improve your trading skills.
Look at trading as a learning path. If you really love what you do, whatever it is, success will certainly find your way.
Good luck and happy trading’s with #BitForex!
By: Ivan Shadrin
21nd July, 2018
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