Here we will analyse a few of the most important reasons why some traders fail and lose money while trading the financial markets.
1) Not starting with a demo account: It might seem that starting with a demo account is a waste of time but at least for the first couple of days or weeks you need to trade on a demo account in order to learn how the market works, get used to your platform and develop your strategy before you put your money and start trading live. It is important to feel comfortable with your platform and be able to use all the platform tools efficiently.
2) Setting up the account leverage too high: Most new traders they set up their account leverage too high because they believe they can become millionaires in a month and they rush to make money. trading live the financial markets is not a movie nor a game. It is a long process and it takes time and dedication to produce profits the right way.
3) Failure to plan: Everyone must have heard by now the famous quote "fail to plan, plan to fail". Most new traders they just get in the market with no plan, disorganised thinking that trading is a simple task and they will become rich in no time. You should treat your trading like you treat any other business. In every business you need to plan in order to succeed. Trading is your business it is not a game.
4) Denial: Most traders fail to admit to themselves that they did a mistake or that the current trade they are in is wrong and they need to cut their losses. Failure to identify your mistakes results in lack of improvement. If you cant identify your mistakes how are you going to correct them.
5) Move their stop loss: The biggest mistake of most new traders is that they move their stop loss when the market is going against them bhelieving that the market is gonna turn in their favor at some point. this results in excessive loses. A good trader should never move their stop loss because you put your stop loss on a certain level when you have opened the trade for a valid reason. It means if the market goes against you and takes you out you were wrong. By changing your stop loss will onl;y result in bigger loses.
6) Trading Discipline and Psychology: The biggest enemy in the markets is yourselves. It is against human nature not to feel the pain or not panic when we lose money but a good trader learns how to manage their emotions and keep executing their traders and keepong their risk management in line even in bad periods. Every trader has bad periods in the markets. What distinguishes a good trader from a bad trader is how you handle yourselves in those situations. Always remember that losses are part of the game, in order to make money you have to lose money.
7) Risk Management: Along with psychology, risk management is the most important trait of a succesful trader. Most traders fail to understand the concept of "cutting the loses early and keep the winnings run". A good trader doesnt necessarily need a high number of winning trades to make money but rather a very good risk reward ratio. Most new traders when they see their trade in a profit get excited or scared and they rush to cash in, but when the trade is against them they take the full loss until it touches their stop loss. If you cut your winnings early but take the full loss when you lose you will most certainly fail beacuse they only way of amking money trading like this is to high a very very high winning rate which is very unlikely.
8) Trading too often and risking too much: One of the biggest mistakes of new traders is that the trade too often and they risk too much on every trade to make money. A good trader always looks for quality trades not quantity. Always remember there is the right way to make money and the wrong way to make money in the markets.
9) Failure to adapt in the markets changing conditions: Most traders fail to realise the shift in market conditions. Markets change because people behaviour changes and it is all of us that we are moving the markets. HIstory is not a valid forecasting tool for the future.
10) Trading without professional training: Most new traders think trading is easy and they just open a book or a website, read a few basic things about trading and they start trading live straight away which results in losing all their money. If trading was that easy everyone would be millionaires by now. If you really want to a full time succesful trader seek for professional traing by a reliable mentor.