MISTAKES AND TRAPS
In this lesson we will cover mistakes and traps which, if not taken seriously, will cost you a lot of money.
The transition from Demo account to Live account
Demo accounts are a great tool for new traders to gain an overall feel of how to execute trade positions and understand how to work with their chosen broker’s platform. However, being a profitable demo trader does not guarantee that you will be as successful when trading a live account.
The reason for this is when trading demo accounts, traders tend to lack emotions due to the knowledge of never really losing money. So when their trade’s don’t go their way on demo, they don’t think about it, they just move on. On a real account this is easier said than done. You get angry, especially as a new trader and you think “I need that money back” and start trading irrationally.
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It’s reacting badly to losses which new traders just don't know how to deal with; which then lead to them doubting themselves and their trading plan, which inevitably leads to a string of losses.
Trading without a Game plan
It’s vital for traders to have a game-plan which they stick to religiously.
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Don’t trade without a clear plan of action.
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A plan enables traders to enter the market in a positive, emotionally detached state of mind, which is essential for success in the markets. As you see a setup present itself, write down all the confluences (reasons to trade) in your notes and once you are happy you are following your rules, write down the area where you are planning to enter and exit the trade and ensure you follow your minimum risk reward requirements and apply risk management rules. Finish off by review your trade after.
This also combats over trading
Patience is a Virtue
The Majority of traders lack patience regarding seeking out the right opportunities to execute a trade. They always want to be in a trade because they want to make money as fast as they can. But preserving your capital is just as important as growing your capital. It’s better to be wishing you were in a trade than desperately wishing you were out of it.
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A lot of the time bad trades appear when traders jump the gun instead of following their game-plan. It’s vital that you stick to your trading plan and be patient. The market is a never ending stream of opportunities; there’s always another one around the corner.
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Patience is also key when you’re in a trade. Price may consolidate or even go against you but the key is to trust your game-plan, stick to your game-plan, take the win or loss and move on.
Going Indicator Crazy
Flooding your charts with lagging indicators will not help you become a better trader; more isn't better in this case.
We need to be able to see price action clearly to be able to form a plan of action when trading. You can see from this example that reading price action becomes an impossible task when your chart has too many indicators on it.
