Common Trading Mistakes-Top 3 Ways To Avoid for Long-Term Success

1. Risk/Money Management

If you ask a professional/successful trader what is the one aspect of trading that separates the winners from losers? The majority will say RISK MANAGEMENT. Successful traders know that their trading capital is the key to their very trading existence and protecting this is more important than their gains. Without capital, you can’t earn from trading. They know that any one loss or series of losses is all part of the trading game. To achieve long-term trading success, they must ration their trading capital appropriately by only risking a small percentage of their capital on any one trade.

You may have heard of the famous 1 per cent perper trade or even some professionals who trade multiple derivatives or instruments cap a certain percentage of their portfolio per day or week. The main point here being you must only be prepared to risk with what you are comfortable with. In contrast, unsuccessful traders do not show the same respect for their trading capital showing signs of inconsistency and making them prone to incur losses which materially erode (or even eradicate) their trading capital unnecessarily.

2. Trading is a ‘Marathon’ not a ‘Sprint’

Successful traders are resilient in the face of bad trading patches or back-to-back losses, taking setbacks as part and parcel of their experience. To maintain a healthy balance between success and failure, it is essential to establish appropriate stop-loss placements that will reduce personal attachment if the execution goes awry. Trading losses should not be seen with emotion but rather accepted for what they truly are; an intrinsic element of any successful trader’s journey.

All great and successful traders learn from their losses and this is why trading is a unique profession as one can alter and adjust their trading plan by avoiding the same pitfall and mistakes. Unsuccessful traders too often fail to see the “woods from the trees” and succumb to the pressures of trading troughs to their detriment.

All instruments stocks, currencies & commodities behave and trend in their unique way and those traders who stick it out to see these cyclical movements can always take advantage when seeing a particular trade e.g. a scenario for you: AUD/USD can move a certain number of (PIPS) on a particular day of the week with high volume movements during a certain hour of the Asian session. If this is recurring, then its cyclical characteristics can only be foreseen by those who spend that extra amount of time on the charts and show patience in executing a trade at the best possible price.

3. Adequate capital funding

When starting as a beginner we always recommend starting with a demo account to practice your chart setups and learn how to place trades as many interfaces and trading terminals differ, the most common being Meta Trader. At the moment there are many trading terminals in the market e.g. Ninja trader, Trading View, MetaTrader 4 etc. Once you’ve learnt how to draw charts & use drawing tools e.g. trend lines, fib retracements etc. the next step is to move swiftly onto a live account to apply your methodology and strategy learnt. Although the majority of brokers have minimum requirements for live account funding mainly in the region of $50-$100, you must understand managing risk using small accounts (please see calculation breakdown based on risking 1-2% per single trade). As shown in the link being consistent with risk and risk/reward ratio is vital but a lot of traders when starting with a micro/nano account can be risking more than 1%. The inevitability results in one blowing their initial capital.

Successful traders treat trading as a serious undertaking and like any business, it needs to be adequately funded. Embarking upon any venture without sufficient funds is a recipe for failure and being undercapitalised places the trader at a serious disadvantage from the very start. The majority of retail traders fail to understand this and are too often “blown out” due to inadequate funding. After all, imagine a business with no rules, procedures or systems which operates solely on an ad-hoc basis. The chances for success are not very high. This is contrasted by the approach of many unsuccessful traders who crave the excitement and thrill of trading stocks, forex and even cryptocurrency with inadequate risk/money management.