It is widely believed that between 8 and 9 out of every 10 traders fail to make any profits from their efforts. With such numbers working against those who believe that they stand a chance in the field of trading, there has to be a comprehensive level of commitment and preparation in order to persist. After all, if you don’t know what to expect, how you will be able to adequately gauge your progression? While you may find luck is on your side, this will seldom last.
In order to try your hand as a trader with a decent level of capital, it is crucial to understand what you are getting yourself into. Take the time to read as much about trading and what you are likely to invest in. Digest as much information as you can from the top financial blogs on personal finance and ensure that you are in a position to trade. If you have established that this is the still the route you are willing to pursue, then implement a strategy and open a demo account to try your hand at trading, risk-free.
There are various pitfalls and potential roadblocks in the way of any first time trader, but the benefit to understanding what the more common mistakes are is learning how to personally avoid them.
Below we take a look at the biggest mistakes made by traders:
Not planning for losses
Many first time traders are under the impression that trading is simply an easy way to make money, and comes with no real risk. This could not be further from the truth. If you have bought in to making money in this fashion off the back of a recommendation from a friend or colleague, do your research first. Having nothing in the form of a loss management plan will likely see your career in trading finish before it has a chance to begin.
Focusing exclusively on profit
This can be a crucial mistake, as you are essentially allowing the finer details pass you by. While yes, you are trading to make money, the key here is that profit is a result of successful trading. If you are too invested in spending money you have yet to make, you are not really committing to what it takes to become a long time and successful operator. You can never learn everything, as this industry is fundamentally based on speculation. You can always learn something new, so get studying and develop your approach.
Not managing money the right way
If you are, by nature, someone who prefers the gung-ho approach, then trading may not be for you. Lack of emotional control usually leads to poor management of money, which culminates in a sobering wake-up call that will see you lose and lose fast. In order to avoid being ousted from the game before you have a chance to really find your feet, devise a plan which will outline just how much you are prepared to lose. Don’t risk money you cannot afford!
Attempting to trade with no idea of how it works
A fool and their money are easily parted, so the proverb goes. Why would you essentially risk your cash on something which has no substantial chance of working out. If you cannot read charts, have no idea how markets differ and are generally treating trading as a lottery then you are heading for disaster areas. If needs be, get as much help as possible. Watch videos, or consult professionals for advice and assistance on an action plan.
Making the decision to pursue a career as a trader can potentially be one of the best choices we can make. With the right preparation and understanding of what you are getting yourself into, you may one day be able to leave your 9-5 and enjoy life on your terms.