While trading can be a great way to earn an extra income, the harsh reality is that making profit from your trades is no easy feat. On the contrary, most novice traders fail to turn over any significant profit at all. That’s why, today, the forex experts over at Learn to Trade are detailing 3 of the most common reasons your trades are failing, helping you learn from your mistakes and better your market strategy for the future.
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You’re over-complicating things
Trading can get complicated. Once you’ve begun delving into strategy, an influx of charts, indicators and graphs can at first appear daunting, and the temptation to over-analyse these is often tough to resist. After all, you want your strategy to be as well-informed as possible, right?
Not exactly. While there is, of course, great value in utilising trading tools to inform your market strategy, a novice must understand that these tools are used to inform the most advanced approaches. As such, wasting hours studying external information is, to the inexperienced trader, over-complicating the whole process.
Instead, take it back to basics. Of course, utilise charts and indicators where relevant, but understand that thorough comprehension of these comes with time and experience. Keep your decisions simple and informed by what you’re confident you know – you might be surprised at the results…
You didn’t take advantage of demo accounts
To follow up our last point, experience is perhaps the number one secret to a successful trade. As a result, taking advantage of the plethora of demo trading accounts available is a great way to gain exposure to a live market, without the risk of any negative financial repercussions.
As a rule of thumb, we recommend those new to trading spend 1-2 months trading exclusively on demo accounts. This way, you can trial different methods and approaches, while becoming more familiar with common value fluctuations and market redirections. This way, once you finally decide to enter a live market with actual money, you’ll have a foundation of experience on which to build on.
If you’re already trying your hand on a trading market but never took advantage of a demo account previously, it’s not too late! Take some time away from the live market and instead trial your trades on a demo account, utilising this opportunity to better inform your existing strategy.
You can’t accept your losses
One ofthe most common mistakes made by new traders is emotional trading – placing reactionary trades based on the outcome of the one previously placed. To many novices, this is their inevitable downfall. Making a loss on a trade or two can quite easily set off a chain reaction of emotion-driven trades in an attempt to recoup losses, quickly diminishing a trading budget.
Accepting your losses is, in essence, part and parcel of trading. Though you can hope they’re infrequent, losses will inevitably occur, and utilising these instances as learning opportunities often sets the experts apart from the inexperienced. By remaining emotionally neutral, you’ll resist ill-informed reactionary trades in favour of a better informed strategy – to the eventual benefit of your profitability on the market.
Trading is no easy game, so knowing where you’re going wrong is to the overall benefit of both you and your trades. As such, look to follow our tips to overcome these common mistakes and better inform your trading approach for the future.
Author bio:
John James is a content writer for Learn To Trade, the foreign exchange education and learning specialists – offering a range of training courses to help people understand the currency trading market, as well as its opportunities and risks.