Trading mistakes to avoid nowadays as a professional trader

Have you ever thought about what are the worst trading mistakes to avoid as a trader? What are those Forex, stock, or crypto trading mistakes that numerous traders commonly make during everyday trading?

First of all, regardless of your trading plan, errors are made by not incorporating appropriate risk management into the account volume.

That’s why stock or crypto investors are often losing their money. These are common and simple trading mistakes that traders commit despite knowing them; they keep ignoring them. 

Most traders who are into crypto exchange or stock prices know the importance of incorporating risk management in their trading strategies.

It must correspond with the account size and the risk of their investor profile and investment decisions.

They are easy and, certainly, the worst trading mistakes to avoid. However, these trading mistakes are significant since, in many cases, they are responsible for many traders not being able to succeed in the long term.

So, what is the most common mistake one trading account can make? Let’s find out the most common trading mistakes to avoid, shall we? 

#1 Identify the risk of loss

First, you have to keep things simple, avoid complications, and be effective.

Do not fool yourself. The worst enemy in the markets is ourselves. So: We must identify the risk of loss we can run without damaging our economy.

We need to define our risk profile as an investor and not what we want to be. And once defined, work with financial assets that adjust to that risk profile. 

#2 Choose the financial assets

Carry out a real and not fictitious investor project. We have to demand a return on the investment in line with the capital invested, the assets chosen at risk and the period we demand from that investment.

Know the actors involved in the market and what role they play. Any professional who wants to carry out his activity in a specific sector must know the sector in depth. 

The idea is to find a source of return and understand how it behaves in terms of return and risk in different market contexts. It is convenient to study profitability and risk both in absolute terms, in relative terms and in terms of risk.

#3 Set a loss limit per operation

Once the sources of return that we will include in the portfolio have been decided, the next step is to find an optimal way to combine them. 

We need to set a loss limit per operation, day, week, month, and the account’s total. At this point, the appropriate % per trade must be between 0.8% and 3%.

The smaller the loss, the more chance we have of succeeding. We should not deposit 100% that we have decided we are willing to lose at once.

Diversifying in this aspect can help us to return to the adventure in case of failure on the first attempt. Choose a leverage and input volume appropriate to the amount of the account and not to the benefits we want to obtain. 

What do you need to remember?

Remember you have to get small losses and big profits; therefore, detect trends and work in favour of them by moving profit.

Work the stop and profit in temporary terms that are in accordance with our chosen investor style. We would have to close a maximum of 4/6 candles.

That is, if we have chosen we are a 15-minute trader, the operations would have to be completed at 4/6 candles; therefore, a maximum of 1 h/1.5 h.

Take into account the risk/benefit binomial in the entries. We don’t always have to be invested in the markets. There are times when the risk is greater than the benefit it can bring.

Therefore, detecting when to be in, when to close positions and especially when you should not enter will avoid a lot of risk and trading mistakes.

All the aforementioned is very simple to apply, and most investors know it. However, many of them do not incorporate it. Just keep it simple, avoid complications and be effective. All of this will bring you closer to success than failure.

#4 Avoid risking too much while trading

Trading mistakes can occur when newcomers succumb to the fear of missing out (FOMO) and allow it to dictate their actions, leading to excessive risk-taking.

This common pitfall arises when inexperienced traders fixate on the potential gains they could have made and disregard the losses they might have incurred. 

For instance, losing 50% of your capital in a single trade can be disastrous, as you will need to double your money in the next trade just to break even. This is an unsustainable approach, particularly if you are new to the forex market.

To avoid such trading mistakes, it is essential only to risk what you can afford to lose. A helpful guideline is limiting your risk to 2% of your capital on a single position or a correlated combination of positions.

While this percentage might seem low, it is a practical approach that allows you to remain in the game long enough to hone your profitable skills.

Don’t make hasty decisions

Furthermore, following this strategy can help you maintain your composure during a losing trade, reducing the likelihood of making hasty decisions or exiting trades prematurely due to panic.

Incorporating technical analysis and stop-loss orders into your entry and exit strategy can also be beneficial, particularly in crypto markets, where volatility is high. By doing so, you can mitigate potential trading mistakes and enhance your chances of success.

#5 Not using stop loss properly 

One of the worst trading mistakes to avoid is failing to use a stop loss. In the highly volatile forex market, prices can fluctuate rapidly and unpredictably, making it crucial to have a strategy in place to limit potential losses.

Placing a stop loss at the appropriate price level can make the difference between success, survival, or losing everything.

Inexperienced traders may be tempted to use excessive leverage, which can compound the risks and lead to catastrophic losses in a matter of minutes.

Even a brief distraction or a break from trading can result in significant losses, making it essential to set a stop loss as soon as you enter a new position. 

By doing so, you can mitigate potential risks and protect your capital from sudden market movements. So, always remember to implement a stop-loss strategy when trading to avoid one of the worst trading mistakes.

#6 Utilizing poor risk-reward-ratio

One common flaw among crypto traders is entering a trade without conducting a proper risk-to-reward analysis. Trading can be an exhilarating experience that triggers an adrenaline rush and heightened attention, leading to addictive behaviour that isn’t influenced by profits or losses.

As a result, novice traders may take positions with poor profit potential and excessive risk merely for the thrill of “being in the market.”

To avoid this mistake, it is crucial to exercise strict discipline and conduct an unbiased risk-to-reward analysis before entering a trade. This involves identifying opportunities that offer a minimum profit potential of three times the expected losses if the trade turns against you.

Additionally, it is essential to consider the appropriate time frame for your trades, as day trading and other short-term strategies can be highly risky and require a greater focus on risk management.

By adopting a more structured approach and carefully analyzing each opportunity, traders can overcome the temptation to take trades with poor risk-to-reward ratios and increase their chances of success.

So, always remember to assess the potential risks and rewards before entering any trade, regardless of how exciting the market may seem.

Bottom line

Once you become aware of the worst trading mistakes you can make, preventing them from becoming a problem is much easier.

Being informed about them can help you learn how to solve them and avoid coming into contact with them for good! Good luck on your way to achieving your long-term trading goals with a wise and well-planned trading strategy!