5 Common Trading Mistakes New Traders Must Avoid

5 Common Trading Mistakes New Traders Must Avoid

As a trader you buy and sell securities more frequently than investors. You also hold your positions for shorter periods of time. Because of this you are more likely to make mistakes that can quickly wipe out your investing capital. If you are looking to be a successful trader, here are 5 common trading mistakes you must avoid.

Mistake #1 – Holding On To A Losing Position Too Long

Successful traders know how to take a quick loss. If something is not working they quickly get out and move on to the next trade. Unsuccessful traders tend to get paralyzed if a trade goes bad. Instead of taking a quick loss they will hold on to it hoping it will rebound. This type of inaction will result in a significant loss in investment capital.

Mistake #2 – Overtrading

Trading too frequently is the fastest way to erode returns. If your goal is to turn a nice profit you should limit how often you trade in a certain period of time.

Mistake #3 – Looking At Trading As The Road To Quick Riches

Trading is one of the most demanding things you can ever do. It takes a great deal of patience, knowledge and trial and error to be successful. If you approach it as a way to “get rich quick” you will find yourself taking excessive risks that can lead to a trading disaster you can't bounce back from.

Mistake #4 – Blindly Following The Herd

This is a common mistake you see a lot of new, inexperienced traders make. When you blindly follow the herd you may find yourself making moves that can get you in a lot of hot water. While most experienced traders follow the trend, they also know how to exit trades at the right time. As a new trader you haven't gained the experience to know when to get out of a trade. So stick with what you know and avoid following the herd.

#5 – Trading Multiple Markets At The Same Time

When you trade multiple markets that means you are going from currencies to commodities to stocks, just to name a few. As a new trader your number one objective should be to master one market at a time. Once you have excelled in one market you can move on to the next. Trying to trade multiple markets at the same time will almost always end with you losing all of your investment capital.

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