Whether you are trading fx markets or on the stock exchange, there are some things you just shouldn’t do if you want to make a profit. Trading is an individual pursuit and you need to make your own methods, but there are certain tried-and-tested ways to make sure you’ll fail – here are a few of the ways you shouldn’t trade. Take a look at what you need to avoid.
- Not Having a Method
You need to take a step back and work out your overall objectives and strategies in order to put your own method of trading in place – and follow it. Unless you know why you are trading on particular positions and what you want to gain you are likely to fall victim to fear when the positions change, and fear makes for problematic movements. Keep a good idea of your own individual process and plans and don’t be swayed too much by anyone else’s.
- Trading Too Often
If you spread your expertise and energy over too wide an area and too many new positions, you are more likely to miss crucial details that could affect your profits, and you are likely to fall victim to rumours that don’t bring you any benefits. Pay attention to your overall strategy and focus on what you know and where you do best.
- Trading Too Big
As well as when you enter, you also need to work out how big you are going to go. Trading too big often results in having to exit an action too early, which invalidates the decision to go big in the first place. When you open with large positions there is a bigger risk that fear will take over and make your trading decisions for you. Work out limits to which you will trade; platforms like CMC Markets provide risk management tools for the effective management of your trades.
- Watching Too Closely
Of course you need to pay attention to your trades but it can be counterproductive to monitor them too closely. You get caught up in tiny movements that may not overall affect your positions, and end up closing too quickly on many occasions and overtrading on others. Often it is a good idea to take a step back from the market and then come back to it later with a clear head, without worrying about the minute movements that will be heading in a different direction in a few hours.
Trading is not an exact science and there are as many methods and procedures out there as there are traders. You need to develop your own priorities and procedures, monitor your overall movements and profits, and learn where to maximise your positions in order to build effectiveness. Trading is necessarily a risky business but you can give yourself a head start by avoiding these pitfalls and focusing on your strengths.
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