What genuinely differs an adept trader from a novice trader is the amount of trading experience they respectively possess. Believe it or not, experience matters in trading. While adept traders tend to be more calculative, here are 3 trading mistakes novice traders associate themselves with.
Novice Traders Rarely Set a Stop Loss
Putting a stop loss in trading is essential, yet unfortunately, this is one of the trading mistakes novice traders often do. They rarely set a stop loss.
Novice traders are sometimes afraid of putting a stop loss. The reason being they believe that they need to give some time to their trade to see how it works out. Another reason is that they are afraid to make a ‘bold’ move due to brokers.
With this in mind, they are jeopardizing themselves. They expose themselves to a major drawdown that might happen if the market happens to ‘move’. In the long run, they might empty their own accounts.
The thing is, the bigger the drawdown the bigger the effort required to even break even. For instance, a 25% drawdown requires a 33% gain to break even and 33% drawdown needs a 50% gain. Hence, the higher the drawdown, the more taxing it becomes.
Novice Traders Select Their Broker Irresponsibly
Considering today’s rapid and complex development of trading, brokers are escalating in number. Due to the tight competition, numerous brokers claim to have a better offer and, truthfully, it is mouthwatering.
Being novitiate in the world of trading, novice traders tend to conduct little to minimum research pertaining to brokers. This, arguably, is totally unjustifiable.
Examining the quality of brokers is a necessity in trading. Put simply, a great broker should ensure the smooth and accurate execution of the trades.
Thus, in order to responsibly select the prospective broker, it is paramount to raise these three questions. These include the regulation of the broker, the safety of the funds, and to what extent their support is.
Novice Traders Have Little to None Confidence
Salient as it actually is, confidence is one of the vital factors that novice traders often lack of. Though it is understandable that they might be worrisome and anxious about their first debut as a trader, a lack of confidence will indubitably backfire.
A lack of confidence is one of the fatal trading mistakes that many traders tend to underestimate. To describe their lack of confidence, there are categories to classify their slight bravado.
First and foremost, they do not trust their own judgment. While it is important to listen and observe the facts on the market, it is also crucial to place trust in their judgement. Otherwise, they will be easily influenced if there is a novel narrative going around without even considering the percentage of its facts and rumors.
Secondly, novice traders tend to worry about things too much. They worry their every single move and are afraid that they will make mistakes. The secret of many skillful traders is that they do not worry too much and they, sometimes, still lose. The point is not to let your morale down. Set it and forget it.
Last but not least, although this is arguably more like ignorance, novice traders underestimate their learning process. Successes and mistakes happen, and the learning process goes every time they make a transaction. Great traders make a post-trade analysis to examine their strategies; thus novice traders better consider to do so.