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Top 5 Mistakes by Traders

ICE Markets

Here are five common mistakes that both novice and seasoned traders make all too often. Trading can be a difficult process even when you are being diligent but if you acknowledged the following five simple lessons it may ensure that you do not stumble where many others have before.


1) Setting up a stop loss is essential!


Trading without a stop loss is trading suicide. There may be a chance that you can survive and make profits, but there will come a point when you are on a losing trade. A single loss without a stop can do lead to an entire account being wiped.

The problem with not placing a stop loss is that people have a tendency to not be able to close the position in a loss scenario and even if they have a mental stop loss this can often be overlooked leading to potential account wiping trades.


2) No Trade Plan or Journaling


Not having a plan of attack is ranked as a high contributing factor for the death of a trader. You should be specific to your intentions of what is to be traded, how should it be traded and the expected outcome, (these must be specific including levels and prices).

The trade plan and analysis done prior to trading setups will be the largest aspect of work that must be done for trading, so take your time and be strategic. When starting off, a simple trade plan can be outlining your entry and exit conditions then applying your specific risk management rules. It is also advisable to take a snapshot before and after of your trades, so you can go back and learn from your successes and failures at the end of the day/week/month. Trading without a plan is planning to fail!


3) Chasing a trade or "Revenge Trading"


Trading is as much about controlling your emotional state as it is about anything else. When you are trading well in a methodical pattern that replicates a successful approach the last thing you should do is change it. Losses are part of trading, you win some and you lose some. The winners will out weigh the losers in monetary value as long as you are using the correct approach. Though these losses can affect you more than one would admit, especially if there is a succession of losses.

This is when traders that have no grip on their psychological state chase their losses, by trying to jump straight back into the market. Fresh from the hurt of a trade risk management can be ignored possibly even the entire trading plan. More often than not these will also end up as losses and now the hole of despair can be far wider and deeper than at start of the loss of emotions. Do yourself a favour and walk away from your charts, live to trade another day with your trading account in good shape.


4) Having Unrealistic Expectations


The idea of having goals and achieving them keeps us motivated and means we keep on track and focused. The problem here is that setting realistic goals that work for you can sometimes be tough. For example, making 100-150 pips each day sounds fantastic but is it achievable trading the way you are specific to; timeframe, strategy, trading instrument?When setting your own expectations remember that the market does not work around you. There may be times when there will be plenty of trading opportunities and other times their will be none. The important lesson here is about being able to hold yourself back from unrealistic expectations and taking concrete steps thus enabling you to achieve smaller but more achievable goals that will set you up for success.


5) Letting Losing Trades Run & Cutting Your Winning Trades Short


This one is an account buster and all traders will make this mistake at some point during their career.

You may have a trade active on the markets with a stop loss. Your natural feeling is that you have a limit on the loss, so nothing can be worse than the maximum risk you have calculated. It is when the trade swings against you taking the position into the red, do you leave it or move the stop so you do not make a loss? You should always do the latter. It may e tempting to move the stop loss but interfering negates all analysis that you have worked on previously and blows your trading plan out of the water. If you keep adjusting the stop it may blow much of your trading account too.

The reverse here of cutting your winners short because of the monetary value or just fear of a reversal can be equally as damaging both in the long and short term.


For more information and guidance on what to trade and how-to trade be sure to visit our dedicated forums for our clients and stay tuned to all future news and information releases by Ice FX.


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