It seems that a lot of traders burn out before you know it. In this article, we summed up some of the most common reasons for trading failure, as well as some ways you can make sure the market lives up to your expectations.
- Too High Hopes
It’s good to be positive about starting your trading career, but one of the main reasons for quick failure is (ironically enough) the desire to get rich quick. Many traders enter the market thinking that trading is easy and they will be making substantial amounts of money before they know it. Although this too can happen, trading is more often than not, a long-term game which requires training and desire to learn. Exceedingly high hopes can lead to disillusion and disappointment, causing traders to give up long before they have the chance to make it in the markets.
- Failure to stick to your Plan
Some tend to forget that trading isn’t gambling. Once you find your trading strategy, it is advisable to stick to it, rather than make emotion-based moves or frantically jump from one strategy or indicator set to another. You may think you are trying to keep up with the markets and adapt, when in reality, you may just end up confusing yourself. Adopting chaotic behaviour tends to lead to loss.
- Analysis Paralysis
Trading can be scary, especially for a beginner. After all, nobody wants to lose their investment. However, once you let fear get the best of you, you may end up in a vicious cycle of missing out on winning trades or failing to close losing ones in time.
- Failure to understand Risk Management
With the prime focus on money, novice traders are often pulled into ignoring risk management practices. Once you see how much a trade could be worth, you may become less cautious. And while there is no successful trading without risk, it’s important to keep a cool head and evaluate your risks properly.
- Lack of Knowledge and Mentorship
The importance of knowledge in trading should never be undermined. Most customer-success-oriented brokers will provide educational material and free training to make sure you develop your skills.
Equally important is a good mentor. Despite common opinion, mentors are a good asset for both – the less experienced and experienced traders. In the first case, they are the ones to provide support and help you learn how to trade on the markets, while you are still not familiar enough with the markets. In the second – it’s a way to share your thoughts with professionals working in this industry.
*Risk Warning: CFDs are complex instruments that come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts, lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.