The Most Common Mistakes Traders Make & How to Avoid Them

Today, we are going to take a look at the most common trading mistakes made by traders, including both novice and experienced traders.

No trader is immune from making mistakes, and being aware of the most common mistakes can help us greatly in reducing the amount we make.

In today's video, you will learn:

• Misidentifying the phases of the market.
• Trading too large.
• Treating trading as a hobby.
• Information overload, using too many indicators.

Read on below for the full transcript of the most common trading mistakes traders make.

Misidentifying the phases of the market.

The first of these is misidentifying the phases of the market. It is really only trending up, trending down or trading sideways, or as it is commonly called consolidation. Now, regardless of what timeframe you are looking at, you will be able to identify a trend of some kind. The issue with misidentifying. A market really comes down to the play of whether or not you are looking at it from the right perspective. It is all about the big picture after all. So, if you are looking at a trend and you might identify it in a 15-minute chart, be aware of knowing that it might be a retracement on a longer timeframe. And the overarching idea of trying to get that change in direction might be contributing to you having losses. So, keep an eye on, make sure you understand what phase of the market you were in at all times.

Now this one here being married to your position might seem a little bit odd, but the reality of it is it actually follows on from misidentifying a trend. And usually this occurs when you get someone who is in a position, looking for a particular direction, thinking that it might be an uptrend for the time being, and they decide that it is still an overall long-term uptrend and they misidentify that phase. And then therefore their long-winded big observations end up being that they were really in the wrong side of the market.

And quite often there is a lot of emotion that goes into this play. And it is not until after the fact when we have closed the position often for a loss, when we come back and revaluate, what is going on, that we really look at it and go, what was I thinking? So, to combat that we try not get married to our positions. It is important to take a break. It is important to come back with fresh eyes and revaluate your situation. If this sounds like you have done something like this before, then some of those strategies really important to mitigate those risks are going to involve literally just taking a break for a couple of minutes and walking away from the charts and coming back with fresh eyes on a longer timeframe to really see where you are actually at in the market.

Trading too large.

The next one to look out today is about trading too large. Quite often, we find that people over leverage their positions or simply do not understand leverage. You will find that you will be risking more than the account can actually handle. And you will be attempting to recover from drawdowns quite frequently. Of course, we always get the issue with people trying to be a little bit greedier than they need to be and having what we call hero trade, where they might be trying to recuperate that account. Because of course, as we all know, if you have a 10% drop, it means you need to make 11.1% back to actually get back to break even plus you a little bit of profit you needed before. So we might try and load up on our position and take a bigger trade than is necessary. Obviously exposing ourselves to more risk, therefore, a hero trade.

Treating trading as a hobby.

Now this one is very, very important. And it is all about how you actually treat your trading. All too often, I see traders treating their trading as a hobby. They come home from work. They have a little bit of a flick and a play. And the reality is if you treat your trading like a hobby, expect hobby results, you need to be treating it like a business. And of course, if you are look treating it as a business, if you treat it as a part time business, you get part time results.

If you treat it as a full time business, you get full time results. So it is very important to have that business mentality when it comes to your trading. Cause after all we are in the game to make money, we are not here to play. So treat it like a business and you will be a lot safer in the market down the track.

Information overload, using too many indicators.

The next one to look at is information overload and information overload is something that might end up in information or paralysis by analysis. And this is something that you frequently find when traders use way too many indicators on their charts, or quite simply they have read so much information on one particular topic that it becomes a case of that there are so many compacting or competing ideas in your mind that you might find that you are not quite sure which way to go. And this happens a lot.

And even still to this day, I suffer from this myself occasionally, but there are solutions. The best of these is simply walking away, going, getting a good night's sleep and coming back with fresh eyes the next day, or even the following day and revaluating what is happening in the market at the given time with much less information in your head and a little bit of a breathing break in between, it allows you to think a little bit more clearly. So that would be my gifting piece of advice to all of you.

Now, of course, in today's video, if there is anything that you do want to try and put into practice, feel free to download an ACY Securities demo account today and turn theory into practice.

All the best with your trading.

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