Most novice traders enter full throttle into the markets without sharpening their skills at navigating the movements with profit.
They end up making foolish moves and decisions that rob them of their hard-earned trading capital.
The truth is that even professional Wall Street traders made mistakes when they were starting their trading journey.
However, the trick to their eventual success lies in their ability to learn to minimize them going forward.
Here are some 5 common foolish trading habits and how to overcome them.
1. Trading without stop loss
This must be the most common of all the foolish errors traders make. Without a stop loss, you’ll be like a soldier going to battle without a loaded gun—he’ll get killed the next minute war breaks out.
If you open a position in the market and fail to put a stop loss, the market conditions can reverse the next minute and kill your profits and trading capital.
So, before entering the market, ensure your stop loss is well placed so that you can prevent losses from happening.
2. Trading against the trend
You’ve heard the saying that “the trend is your best friend”? Never try to fool yourself to place trades that are clearly against the overall market trend, unless you are one of the gurus in Wall Street.
Trading forex or binary options is profitable when you make love with the trend and obey it in all the decisions you make.
The trend represents the general sentiment in the market. Remember that no single individual can be cleverer than the whole market.
3. Trading without a plan
Failing to plan is planning to fail, right? Without a clear road map on how you are going to execute that trade, you are simply making a room for failure.
For you to succeed in trading, you need an elaborate strategy that will dictate how you formulate trade decisions, stipulate where you place your entry and exit orders, and authenticate every move you take in the market.
If you don’t have a trading plan, then it’s better you go to the nearest casino, register as a member, put your chips on black, and close one of your eyes.
4. Trading off hours
The financial markets are great lucrative playing grounds with very high activity levels than other markets in the globe. And, they are normally open round-the-clock, 24 hours a day.
However, this does not imply that every time is trading time. There are times of the day when placing trades will lead to more losses than wins. For example, when major news is about to be released.
So, you should be an opportunity grabber and schedule your trades during high liquidity periods.
When trading forex and binary options, the best time to place trades is during an overlap of the trading sessions.
5. Trading with a wheelbarrow of emotions
Emotionally-charged trading decisions is one of the greatest foolish trading habits.
Instead of making sound decisions based on a thorough market analysis, most traders push their wheelbarrow of emotions into the trading arena and end up making foolish and unsound trade decisions.
If you trade with emotions, you’ll deviate from your plan and start revenge trading.
To separate your gut feelings from your trading decisions, learn to calm yourself down before placing a trade, keep a journal to help you in analyzing your weaknesses, and stick to your plan always.
Are you struggling with any bad trading habit? Please post your comments below.