By Admiral Markets
Most of us tend to trade our special way, and in doing so, we end up with the crowd that loses money.
The question is why so?
When all of your trading buddies are buying stocks, talking about the EUR going for 1.2000, and all the analysts are confirming it, it is hard to take a contrarian view.
After all, if you make a trade against everyone else and turn out to be wrong, your friends will just think you’re crazy to go against the crowd.
It’s quite easy to say I shall follow the crowd and know when to exit my trade.
Doing it is something entirely different, and that is why crowds move together.
Most hedge and mutual funds are no different. They also can take hits along with retail traders and investors, although they don’t usually get to extremes like an uneducated trader who is more likely to completely wipe out their account when things go wrong.
1. Trading Out of Anger
Trading out of anger is also known as
revenge trading. Revenge trading could possibly be the worst trading decision.
Traders usually do it after a loss, badly wanting to get their money back, or, more specifically, to win back the trade they’ve just lost.
Traders do that raising the leverage and making impulse trades just after a loss occurred.
If the trade turns out to be successful, bear in mind that you’ve won exclusively by gambling, and you might try to repeat that win by gambling again, without using anything more than gut instinct.
That’s really bad.
2. Flipping Out and Getting into the Spiral of Doom
It happens quite a lot. A trader makes a trade, the market goes against them. They say this is madness and put even more money into the trade only to lose all the money and flip out.
What happens next is “a spiral of doom”. That’s real madness. Think about it!
3. Working Too Much
Forex trading is opposed to having a standard day job. Traders say less is more.
Forex & CFD trading is about controlling your fear and greed on every trade as greed is a natural trait of a modern human, and fear will limit correct decision-making.
Forex trading is risky and demands not just a stable standing tripod, but also
4. Trading Live with No Experience
Like any other business and profession, successful and consistent Forex trading takes time.
You can’t expect to walk into a job without any previous experience and hope to be promoted to the manager the next day.
Before investing large amounts of your savings, make sure you’ve got the right amount of experience. We recommend that you test new strategies or techniques on a risk-free
Demo Account first, before engaging in anything risky in the live markets.
Remember, you want to be a fully fledged trader who can deal with anything trading can offer.
Fortunately, we’re here to help you and guide you through all the stages of development as a trader.
5. Going “All In”
Let’s say you’ve had several losing trades in a row and you want to make it all back in one trade. Because you have been trading very well lately, you feel like you can’t lose and you take a huge position. You want a grand slam! One single trade that will end up a losing streak and possibly make you some profit as well.
Everything on one trade? Nah, it doesn’t happen. What happens is that you risk too much, and mistakes just tend to compound. If this single “big” trade goes against you, chances are you will cancel your stop-loss and risk everything. You might end up with a dreaded margin call.
My advice as a trader to a trader is to stick to your own guns, follow your
risk management strategy religiously, and avoid going “all in”, no matter what!
Cheers and safe trading,
Article by Admiral Markets
Admiral Markets is a leading online provider, offering trading with Forex and CFDs on stocks, indices, precious metals and energy.