Thing you should avoid in trading

1. Trading without a trading plan

Every trader needs a trading plan. If they don't have one, it’s time to get one and the best place to start is by thinking about why you’re trading.

Is it because they want to earn a bit of extra money on the side of their regular job?

Do they want to make a career out of tracking the stock market?

Is it just something they're doing for a challenge?

Whatever the reason may be, the goals will help dictate the way a person trades. 

Traders need to think about what they really want to get from trading and then work out how to get it. Consider the amount of time available to dedicate to trading, the types of trades to pursue (e.g. high volume, low profit), and whether the level of knowledge is sufficient or if more time is needed on education.

2. Trading too much, too soon

Due to the potential to earn money from trading the temptation, especially for new traders, is to push limits in the hope of getting greater profits quickly. 

But going into trades too enthusiastically - either in volume or value - only serves to raise your level of risk. If you overreach and things go against you, you might bounce yourself out of the market before you’ve even had a chance to settle in. Too many people enter the trading markets with the idea that it’s going to set them on a fast path to millions.

The reality is that trading isn’t the kind of thing where you casually throw in a bit of money and get untold riches in return - it takes a lot of skill and patience to get anywhere near those lofty heights.

Build slowly and steadily. Test things out with a demo trading account first, then once you open a live trading account with real money, invest a small amount and trade in one or two markets to get a feel for things.

Traders can make a profit from forex trading, stock trading, commodity trading, and more, but it rarely gets made on a handful of quick trades.

The more time traders are able to dedicate to trading, the better they become, the easier they find it, and the more trading opportunities reveal themselves.

 

3. Emotional trading

We’ve all experienced that feeling when you’re on a good run and feel like you can’t do anything wrong. When traders apply that to trading, it’s generally when you experience a sequence of profitable trades and you feel like you’ve mastered it. But all good runs eventually come to an end and it’s crucial to remember this because, ultimately, it’s money at stake. 

It’s good to be excited about trading and confidence is always a welcome characteristic, but don’t let emotion dictate trading behaviour and push you into positions you wouldn’t normally take.

Try to temper emotional trading mistakes. Before launching into a trade, take half a step back and try to look at it objectively. Does it fit the trading strategy? Are you doing it based on sound information or just a gut feeling? How would you react if the trade went against you? 

Come up with a system of cues that will help you protect yourself from too much emotional investment.

 

4. Guessing

If traders enter into a trade without doing any preparation, they’re not really a trader. 

In fact, trading without putting any effort towards education or understanding how the markets work is more like walking into a casino, throwing some money on the roulette table, and hoping for the best. While it’s true that there’s an element of unpredictability and volatility inherent to trading, by spending time learning and observing how the market works, traders can form an idea about the types of trades best suited to them.

Educate yourself and be prepared before every trade. Axi offers a wealth of educational content in whatever format you prefer: courses, blogs, eBooks, webinars, and more. Take what you learn and apply it in your demo trading account where you can practice with no risk before moving into the real environment.

5. Not using a stop-loss order

Trading without using a stop-loss level is like driving a car without breaks. It’s too dangerous.

But despite that, many traders still trade without using this useful tool. And in most cases, it ends up in painful losses. Unnecessary and avoidable losses.

If you use a stop-loss level properly, you can avoid getting too deep into a losing position.

Whether you want to put a ‘hard’ stop-loss as soon as you enter a trade, or you have a ‘soft’ stop-loss level in front of you as you trade, you will be in a better position if you use this as part of your risk management. Just remember that soft stop-loss levels are more suitable for advanced traders who have experience in these markets.