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7 common trader mistakes

7 common trader mistakes
“Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”
― Otto von Bismarck

When you’re taking your first steps in any new territory – a new career, a new interest or even a new experience – mistakes are practically unavoidable. Is there a way around this? Not really, but by learning from the experience of others, you can improve your chances of avoiding some of the more common mistakes that other people have made before you.

In this article we will cover 7 of the more common mistakes traders make. If you’re new – or relatively new – to the world of online trading, this article could certainly be of use.

1

Using all your capital in one deal

Using all your capital in one deal

It’s tempting to put all of your funds into one trade, especially if you feel confident that you are following the right trend, but remember: Even the best and most experienced investors have unsuccessful deals. Risking all of your capital at once means that if you have one unsuccessful deal, you won’t be able to continue trading, which could potentially allow you to make up for your losses.

How to avoid

How to avoid

New traders should probably start with smaller deals until they get a better feel of the market and how it operates. You can also use the Demo account to practice with no risk. Many traders also choose to spread their investments in different deals – and different instruments – as part of risk management.

Learn more about risk management strategies and why traders use them.

2

Limiting yourself to a single CFD instrument

Limiting yourself to a single CFD instrument

Which CFD instrument do you favor – EUR/USD, gold, oil or maybe Apple shares? Whichever it is, many traders end up focusing on one or a few instruments they like, and forget that there are many different markets out there. There’s nothing wrong with specializing, but portfolio diversification is viewed as an extremely useful tool for online traders. It allows you to mitigate risk, as well as to explore new opportunities in multiple markets.

How to avoid

How to avoid

At iFOREX, you have the opportunity to trade hundreds of CFD instruments – shares, commodities, indices, currencies and ETFs - from many different markets. You can learn more about the different instrument categories on our Trading Center. Additionally, you’re invited to explore our full selection of instruments on our Trading Conditions page and decide if you want to diversify your portfolio - and how.

3

Misusing leverage

Misusing leverage

Leverage is an extremely popular trading tool, and it can be quite useful, but it’s also a risky tool. When you use leverage, you increase your investment potential, but also increase risk to your investment. New traders get very excited when they realize that leverage allows them to open large deals with a relatively small investment, and don’t realize that this tool needs to be used carefully, and only after sufficient training.

How to avoid

How to avoid

Understanding leverage requires some practice. Use the Demo account to gain a better understanding of how leverage works and take your time getting the hang of it before you start using it in real deals. Want to gain a better insight into this trading tool? Check out our What is Leverage page.

4

Not having a trading strategy

Not having a trading strategy

When managing deals online, there are different trading strategies you can choose to follow, and different methods through which traders decide when they should open and close deals. Planning is crucial for online traders. If you don’t decide in advance what you’re going to do, it’s easy to become overwhelmed and lose yourself in the excitement of the trade.

How to avoid

How to avoid

You can gain a better understanding of different types of analysis – Technical Analysis or Fundamental Analysis - as well as various trading strategies, and choose the one that works for you. Then, take your time planning your trades in advance instead of just trying to figure out what to do as you go along.

5

Not following your trading strategy

Not following your trading strategy

This sounds silly, we know. After all, what is the point of having a trading strategy if you don’t use it? Well, you’ll be amazed by the number of traders who are fully committed to a well-planned trading strategy and then simply lose themselves in the excitement of the trade and forget everything they know. We’re not telling you which trading strategy to use – it’s completely up to you – but once you have a plan, remember it and try to follow it.

How to avoid

How to avoid

Learn, practice and don’t allow yourself to get carried away. There is nothing wrong with changing your mind or deciding to replace one trading strategy with another, but a good plan can help you better manage risks and have better control over multiple deals.

6

Forgetting about Stop Loss and Take Profit

Forgetting about Stop Loss and Take Profit

Stop Loss and Take Profit are two very important market orders, allowing you to manage your deals automatically, even when you’re at work or sleeping. These orders can offer protection from unusual volatility and make sure that you stay within the limits of your trading targets. If you don’t place Stop Loss or Take Profit, you expose yourself to the full power of market volatility and need to constantly monitor your deals in real-time.

How to avoid

How to avoid

It’s very simple to set up Stop Loss and Take Profit orders – they both appear on the iFOREX deal slip. Deciding where to place these orders requires some learning and practice, but many trading strategies could offer helpful information on how to make your decision.

Learn more about Stop Loss and Take Profit.

7

Not doing your research

Not doing your research

Wait… what? I have to do research?! Sorry, but you do. While it’s tempting to just follow your guts or react to news you read on Facebook (and we all know that everything you read on social media is completely accurate, right?), doing proper research is extremely important. When you’re trading online, information can open doors to many exciting opportunities and help you make more informed trading decisions. Not doing your research could result in uncertainty and misinformation.

How to avoid

How to avoid

Luckily, there is plenty of freely available information on leading financial portals like Bloomberg, as well as on the iFOREX news section. You can also take advantage of numerous educational articles dealing with just about any aspect of online trading. Before you start trading a specific CFD instrument, take your time learning about it – its history and the factors that could affect it – and also see what it’s been up to lately. This will provide you with better insight and understanding.

Not sure how to open a deal with iFOREX? Check out a simple trading example.

Can you completely avoid mistakes when trading online?

Can you completely avoid mistakes when trading online?

If anything we wrote here has led you to believe that by following a simple list you can avoid making mistakes while trading online, this is simply not the case. This list shows some of the most common mistakes traders make, but there are many others and you should always treat your trades with care and cautiousness. Every trader makes mistakes – even the most seasoned and well-informed ones – but with awareness, information and practice, you could learn to avoid the major mistakes that others have done before you.

The key elements of trading with iFOREX
  • Negative Balance Protection shields you from unusual volatility
  • A wide variety of CFD instruments – shares, commodities, currencies, indices and ETFs
  • Leverage trading, allowing you to maximize your trading power
  • User-friendly trading platforms for all devices – PC, smartphones and tablets
  • Advanced trading tools and market orders for traders’ convenience
Want to learn more about the factors that affect the market?

Join iFOREX to benefit from our exclusive education package and start taking advantage of market opportunities.

Our Education Package includes:

  • 1-on-1 training with a trading coach

    1-on-1 training with a trading coach

  • A FREE PDF guide for beginners

    A FREE PDF guide for beginners

  • A $5,000 demo account for training

    A $5,000 demo account for training